Global bond yields hit multi-decade highs as selloff drags down stocks worldwide

A punishing selloff in government bonds around the world intensified on Wednesday, dragging down equities from Tokyo to London as investors grappled with rising borrowing costs, hawkish central bank expectations, and an escalating U.S.-Iran conflict that has pushed oil prices toward levels not seen in years.

Bond Yields Hit Multi-Decade Highs

Government borrowing costs from the United States to Germany and Japan reached or neared multi-decade peaks on Wednesday. The yield on the benchmark 10-year U.S. Treasury climbed to around 4.80%, its highest since early 2025, while the UK 10-year gilt yield rose above 5.22% and Germany's 10-year Bund yield Deutsche Börse ↘ 0.88% topped 3.33%. Japan's 10-year government bond yield hit approximately 3.02%, its highest since 1996.reuters+2

A broad gauge of global government bonds surged to 3.72%, its highest since mid-2008, according to Investing.com. The selloff has been fueled by a collision of forces: Federal Reserve Chairman Kevin Warsh's hawkish Jackson Hole speech last week, persistent inflation worries, ballooning government debt, and a fresh spike in oil prices driven by the six-month-old U.S.-Iran conflict. Record corporate bond issuance to fund AI investments — reaching $4.9 trillion so far in 2026 — has added further pressure, according to Reuters.investing+1

Stocks Slide From Asia to Wall Street

Asian markets bore the brunt of the selling on Wednesday. Tokyo's Nikkei 225 dropped 3%, South Korea's Kospi lost 3.6%, and Hong Kong's Hang Seng slipped 0.8%. In Europe on Tuesday, the pan-European STOXX 600 had already fallen to a one-month low, with Germany's DAX down 1.1% and France's CAC 40 losing 0.4%.news4jax+1

U.S. futures pointed to further losses Wednesday, with S&P 500 E-minis down about 0.25% and Nasdaq 100 futures off 0.52%. Wall Street closed lower Tuesday, with the Dow Jones Industrial Average falling more than 400 points. Markets are now pricing in a roughly 68% chance of a Fed rate hike in September, up sharply from about 37% a week ago, according to the CME FedWatch tool.finance.yahoo+2

Oil and Iran Tensions Add Fuel

The geopolitical backdrop has compounded the bond market rout. Brent crude was trading around $95 a barrel Wednesday, up from roughly $72 before the start of the U.S.-Iran war in late February, as the Strait of Hormuz remains largely closed. "If hostilities are going to increase, they are likely to increase within the next couple of weeks. The Iranians have their maximum leverage now before the midterm elections," said Ryan Isherwood, founder and CEO of Significance Capital.finance.yahoo+1

Investors now await Friday's U.S. jobs report, which could further shape expectations for the Fed's September meeting. A soft inflation reading remains the best hope for easing the pressure, but with oil prices elevated and bond markets in turmoil, the path forward remains uncertain.investinglive+1