Global Bond Sell-off Pushes Yields to Multi-Decade Highs

Global government bond markets entered a severe sell-off in early September 2026, driving borrowing costs to their highest levels since the 2008 financial crisis. The rout was catalyzed by a confluence of factors: renewed U.S. military strikes against Iran, which pushed Brent crude oil prices toward $95 per barrel, and massive fiscal deficits across G7 nations. In the United States, national debt surpassed $40 trillion, while 10-year Treasury yields climbed to 4.81%.

Scott Bessent, the U.S. Treasury Secretary, attempted to stabilize markets by doubling buybacks of long-dated Treasuries and pressuring the Bank of Japan to raise interest rates to support the yen. In Japan, 10-year government bond yields hit a 30-year high of 3%, prompting Japanese investors to repatriate funds from overseas assets. Despite this volatility, Japan successfully auctioned 30-year bonds with yields exceeding 4% on September 3.

Central banks have adopted hawkish stances to combat sticky inflation. Federal Reserve Chairman Kevin Warsh signaled potential rate hikes in September, while the European Central Bank and Bank of Japan indicated similar moves. The crisis has extended to the United Kingdom, where 30-year gilt yields reached their highest level since 1998, and to France, which faces significant risk due to a debt-to-GDP ratio of 115%.

Beyond sovereign debt, the AI boom has intensified the sell-off, as technology firms issue massive amounts of debt to fund infrastructure, crowding out government borrowers. President Donald Trump responded to the instability by characterizing the military as the "ultimate intervention" regarding threats to government debt.