Bond Yield Strong – U.S. 30-year yield nears 5%, European debts hit multi-decade highs amid mounting deficit concerns.

Bond Yield –  U.S. 30-year yield nears 5%, European debts hit multi-decade highs amid mounting deficit concerns.

(Definition : Bond yield is the annual interest that the holder of the bond will receive over its term to maturity. )

A sweeping selloff in government bonds gripped financial markets on Tuesday, driving U.S. 30-year Treasury yields to their highest level since mid-July and pushing European debts to multi-decade peaks. The rout was fueled by intensifying investor anxiety that governments across major economies are losing control of their soaring fiscal deficits.

U.S. Treasury Yields Surge

The long end of the U.S. curve led the decline, with the 30-year bond yield climbing 4.4 basis points to 4.961%. It briefly touched 4.999%, a level not seen in approximately 1.5 months. The benchmark 10-year yield also rose, advancing 3.5 basis points to 4.261% and reaching a one-week high.

The selloff was not isolated to the United States but part of a broader global trend, reflecting widespread fears over unsustainable public finances.

European and UK Bonds Under Pressure

• United Kingdom: Britain’s 30-year gilt yield soared to its highest level since 1998, last up 5.2 basis points at 5.694%. The pressure followed Prime Minister Keir Starmer’s government reshuffle, which moved key finance officials in a bid to improve policy coordination.

• Europe: France’s 30-year government bond yield hit a more than 16-year high, driven by political instability as Prime Minister Francois Bayrou engaged in talks to prevent a government collapse. The German 10-year bund yield, the eurozone benchmark, also ascended to a fresh 14-year peak.

The Root of the Selloff: Fiscal Deficits

Analysts pinpointed fears over expanding government debt and deficits as the core driver behind the global rout.

“We’re looking at deficits and outstanding debt that have been triggered outside the U.S.,” said Jim Barnes, director of fixed income at Bryn Mawr Trust. “When I think about the UK, France and so forth, it just brings back to light the deficits here in the U.S., the outstanding debt, and the potential inflationary impact from tariffs.”

The U.S. federal debt currently stands at $37.18 trillion. A Congressional Budget Office report noted that former President Donald Trump’s increased tariffs could reduce the national deficit by $4 trillion over the next decade, primarily through higher tariff revenue and reduced interest payments.

Market Focus Shifts to Key Data and Fed Policy

Attention now turns to critical economic data that will shape monetary policy:

• The monthly U.S. nonfarm payrolls report on Friday.

• The August consumer inflation report on September 11.

Despite the bond market’s fears, U.S. rate futures indicate the market is still betting on a Federal Reserve rate cut this month. The CME Group’s FedWatch tool prices a 92% chance of a 25-basis-point cut at the September 17-18 meeting. Traders currently expect about 57 bps of rate declines this year.

The yield curve steepened notably, with the gap between two-year and 10-year yields hitting 63.60 bps, its widest spread since April. This movement suggests traders are pricing in near-term Fed easing while also demanding a higher premium for long-term inflation risks.

Related : Bond Yield: What It Is, Why It Matters, and How It’s Calculated

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