Rising Bond Yields Spark Global Debt Concerns,Threaten Economic Growth
New York,NY – November 17,2023 – Global bond markets are sending a worrying signal,with rising yields – and therefore higher government borrowing costs – fueling concerns about debt sustainability across the world. Analysts at Deutsche Bank have described the situation as a “slow-moving vicious circle,” where increased yields make it more expensive for nations to manage their debt, particularly as major economies like the U.S., UK, France, and Japan grapple with persistent fiscal deficits.This week saw significant volatility, with the Japanese 30-year yield hitting a record high, the UK’s 30-year reaching a 27-year peak, and the U.S. 30-year briefly surpassing 5% – a level not seen since July. While yields saw a slight pullback on Thursday and Friday, they remain substantially higher than in recent years, a outcome of past interest rate hikes and sustained inflation.(Remember, bond yields and prices move inversely – as yields rise, bond prices fall.)
A Cycle of Increasing pressure
The core issue is a feedback loop. As governments struggle to demonstrate fiscal responsibility, investors demand a higher “risk premium” – essentially, a greater return – to compensate for the perceived increased risk of lending to those nations. This increased demand pushes yields higher, further exacerbating debt burdens and creating a challenging environment for economic growth