Global bond sell-off deepens: UK costs hit highest since 2008, Japan since 1990s

A global sell-off in government bonds intensified on Tuesday, pushing borrowing costs in the UK to their highest level since 2008 and Japanese yields to peaks not seen since the 1990s. The moves reflect growing investor fears that inflation will remain stubbornly high, forcing central banks to keep interest rates elevated for longer than previously expected. In the UK, the yield on 10-year government bonds—the effective cost of borrowing for the state—surged to its sharpest point in over 15 years. This rise signals that investors demand higher returns to hold British debt, a sign of waning confidence in the country’s fiscal outlook. Meanwhile, in Japan, long-term yields climbed to levels last recorded three decades ago, as the Bank of Japan continues to face pressure to tighten its ultra-loose monetary policy. The coordinated rise in borrowing costs across major economies points to a broader shift in market sentiment. Investors are now pricing in a longer battle against inflation, which erodes the fixed returns of bonds. As a result, prices of existing bonds fall, pushing their yields up. Analysts say the sell-off could have real-world consequences. Higher government borrowing costs typically feed through to more expensive mortgages, business loans, and credit cards. For governments, it means larger interest payments on national debt, leaving less room for spending on public services or tax cuts. The current pressure mirrors the bond market turmoil seen in past periods of high inflation, but the scale is notable. With both Western and Asian markets moving in tandem, the sell-off reflects a global repricing of risk—one that could shape central bank decisions in the months ahead.