Government borrowing costs are surging around the world, taking rates in places such as Australia to their highest levels in decades, as investors become increasingly nervous about everything from the Iran war and the new US Federal Reserve chairman to the growing pile of national debt.
Analysts warn that rising bond yields are not going away any time soon, adding further pressure on economies as the higher cost of long-term money filters down to everyday loans, mortgages and company spending.
“[High bond yields] is the old normal,” said Sonal Desai, global chief investment officer for Franklin Templeton Fixed Income, which manages more than $US300 billion ($424 billion) in assets.
“It only ceased to be the old normal when the global financial crisis happened, and for 20 years, all major central banks flooded the market with liquidity, artificially suppressing long end yields.”
In other words, by forcing long-term interest rates through massive bond-buying programs, central banks made it very cheap for households to take out mortgages and for businesses to expand.
“I think we are getting back to what I would consider normalisation of monetary policy. We’ve still got a massive liquidity overhang. We’re just going back to where we were,” said Desai.
In the United States, the sell-off in bonds pushed 10-year yields – which set the benchmark for home loans – to 4.75 per cent overnight, its highest point since early 2025, while the 30-year rate touched 5.34 per cent, a level last seen almost two decades ago.
Source: https://www.afr.com/markets/debt-markets/global-bond-meltdown-adding-further-pressure-on-economy-20260819-p60pjt