Japan 30-year bond yield hits record as global rout deepens

Long-term borrowing costs are climbing across the developed world. Japan's 30-year government bond yield reached a record 4.235% on Monday, and investors expect more pressure on the US, French and British debt markets. Higher energy prices tied to the war in Iran, growing budget deficits and persistent inflation worries are all feeding the rout.finance.yahoo+1

"Bond markets are starting to recognise that the collection of shocks we're seeing are unlikely to prove temporary," Deutsche Bank strategist Henry Allen wrote to clients, Yahoo Finance reported. Allen said that until recently it was "plausible" to put higher yields down to strong growth, but recent moves showed it is "no longer simply a 'strong growth' story".finance.yahoo

Records from Tokyo to Washington

The record in Japan came ahead of Prime Minister Sanae Takaichi's policy speech at the opening of an extraordinary parliamentary session. According to Reuters, as published by The Economic Times, investors are worried that her spending plans will worsen Japan's finances. Shorter-dated yields fell slightly, and the 10-year yield was at 3.08%. "If she says anything that could suggest she would keep her expansionary policy unchanged, that could send the bond yields higher," said Masahito Sugawara of Daiwa Securities.economictimes

In the US, the 10-year Treasury yield has risen more than 110 basis points this year to its highest level since 2002, and the 30-year yield also hit a 2002 high last week. Reuters-based reporting put the 10-year's recent peak at 5.34%. Treasuries swung after a weaker-than-expected September jobs report reduced bets on further Federal Reserve rate hikes.serrarigroup+2

France's 10-year yield is up about 130 basis points since January. Its spread over German debt is near levels last seen in the eurozone crisis, as political instability and the 2027 presidential election unsettle investors. Britain's 10-year gilt yield has risen about 80 basis points. The European Central Bank raised rates by a quarter point in September, while the Bank of England has warned that energy costs could push it to hike.finance.yahoo

Winners and pressure points

Trend-following quant funds are among the winners, according to the Financial Times, as reported by Hedgeweek. Graham Capital's Tactical Trend fund is up more than 31% this year, Aspect Capital's flagship fund about 21%, and Winton's Diversified Macro fund 17.5%. Germany has acted as a relative haven, and hedge funds have been unwinding bets that Italian bonds would beat German debt.hedgeweek

The economy is also feeling the effects. RSM chief economist Joseph Brusuelas said the MOVE index, a gauge of Treasury market volatility, is above its one- and five-year averages. He expects the Fed to raise rates once more in December, with another hike possible in March 2027 if long-term yields keep rising. The Fed's next meetings are on Oct. 28 and Dec. 9.realeconomy.rsmus

Strong growth is also pushing yields higher. JPMorgan's ↗ 0.00% global composite PMI rose to 54.3 in September, its highest in four years.finance.yahoo