Global bond yields hit 18-year high, oil surge fuels rate hike bets

Mettis Global reported that sovereign bond yields around the world have reached their highest point in almost twenty years, as higher oil costs stoked worries about inflation and boosted bets on further rate increases. The sell-off started late last week after Federal Reserve Chair Kevin Warsh restated his determination to keep price growth in check, and it picked up pace this week when fresh Middle East unrest lifted energy costs.

Japan's 10-year government bond yield briefly touched 3%, a level not seen since 1996, and the yield on the U.K.'s 30-year gilt rose to a peak not seen since 1998. The U.S. 10-year Treasury yield also climbed to a level last seen in January 2025, while a Bloomberg gauge of worldwide sovereign yields added to its gains for a fourth straight session on Monday, reaching 3.72%, the highest since mid-2008.

Markets now expect a higher path for short-term rates in the United States and other large economies, and traders see close to 70% odds of a 25-basis-point Federal Reserve hike this month. An ECB increase next week is fully priced in, and traders are almost certain the Bank of Japan will also lift rates later this month.