Bloomberg: Global bond market undergoes structural shift, long-term yields rise to multi-decade highs

BlockBeats news, September 26 — Bloomberg columnist John Authers said the "tectonic plates" of the global economy are shifting, with long-term government bond yields in major economies having risen to multi-decade highs. Japan's 10-year government bond yield hit a more than 30-year high, while government financing costs in major markets such as the United States also rose to their highest levels since before the global financial crisis. However, the rise in bond yields has not yet noticeably hit stocks or the real economy, and the Nasdaq 100 still set a record high this week.

The article argues that this sharp bout of bond market volatility is more likely due to recent economic data continuing to come in stronger than expected, as well as Federal Reserve Chair Warsh taking a more hawkish policy stance than the market had previously anticipated. The market currently expects the U.S. overnight rate to reach 4.75% in a year, whereas before the outbreak of the Iran war it had at one point been expected to fall to 3%.

Authers pointed out that if the 10-year U.S. Treasury yield remains around 5%, a higher risk-free rate of return will make bonds more attractive relative to stocks and help long-term fund management such as pensions, but if yields continue to rise rapidly, it could also intensify fiscal pressure and deal a shock to non-bank financial institutions and highly leveraged companies.