Global Bond Selloff Drives Borrowing Costs to Multi-Decade Highs Amid Economic Headwinds

Key Intelligence

• ■Global bond markets are experiencing a significant selloff, with long-term borrowing costs soaring to multi-decade highs in the US (30-year yields highest since 2007) and Germany (highest since 2011).
• ■Rising yields are attributed to renewed 'bond vigilante' activity, underlying structural changes in the US Treasury market, and a decline in foreign holdings of Treasuries, notably from Japan.
• ■Geopolitical tensions and increasing oil prices are weakening overall risk appetite, contributing to declines in stock markets and halting rallies in some emerging assets.
• ■Central bank rate hike expectations remain a key influence, with reduced hike bets supporting gold and some emerging currencies, while M&G believes too many hikes are still priced into Korean bonds.
• ■Broader economic concerns include a severe supply crunch in the copper market and China's efforts to bolster its economy following a significant growth slowdown.