Bond Yields Hit Decade Highs, Threatening Spending Crunch
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- G7 sovereign yields are approaching 4% on average, up from roughly 3.2% before the Iran war began in late February, with the jump threatening the spending power of governments, businesses and households alike
- U.S. Treasury yields hit multi-month highs, with the benchmark 10-year note jumping to 4.631% and the 30-year — which directly drives mortgage rates — reaching 5.159%, a one-year peak
- Market rate-cut bets have reversed: traders now price roughly a 50% chance the Federal Reserve will raise rates by December, a flip from pre-war expectations of at least one 2026 cut
- Japan and Europe followed the same pattern, with 30-year JGBs hitting a record 4.200% and Germany's 10-year Bund touching a 15-year high of 3.193%; 10-year JGB yields last seen in October 1996
- More-indebted euro-zone nations got hit harder, with Italian 10-year yields up 12 bps in a week to 3.90% and French yields jumping 26 bps over the same period
- G7 finance ministers convened in Paris on Monday, where French Finance Minister Roland Lescure declared, "We are no longer in a period where public debt is not a subject"
- Brandywine Global's Jack McIntyre warned "yields are going to go higher until something breaks," adding that the closer the 10-year Treasury gets to 5%, the more pressure builds on equity markets
Why it matters: The roughly 80-basis-point surge in average G7 borrowing costs since the war began flows directly into everything from car loans to multi-billion-dollar data-center financing, while shrinking central banks' room to cut rates. With G7 finance ministers forced onto an emergency footing in Paris, the bond market is now effectively constraining fiscal policy across the developed world — and the 30-year U.S. Treasury above 5.15% signals that mortgage pain is the most immediate household consequence.
