bonds

Borrowing costs across some of Europe’s biggest economies have surged to their highest levels in more than 15 years, as a renewed sell-off in global bond markets gathers pace.

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The global bond rout pushed Germany’s benchmark borrowing costs to a 15-year high on Tuesday, with France, Italy and the Netherlands all seeing similarly steep rises.

Germany’s 10-year Bund climbed above 3.36% on Tuesday, according to Trading Economics. Later, the yield went down a bit and traded at around 3.34%.

Bond yields move inversely to prices. When investors sell bonds, prices fall, and because a bond’s fixed interest payment becomes worth more relative to that lower price, the effective yield rises.

In short — the more bonds get sold, the more it costs governments to borrow.

Sovereign debt came under renewed pressure as rising oil prices and increasingly hawkish signals from major central banks reinforced bets that interest rates will stay higher for longer.

The yield on Germany’s 30-year Bund surged above 3.84%, also its highest level since 2011. The French 10-year OAT yield rose to its highest level since November 2008, trading slightly above 4.215% at around 10.45 CEST on Tuesday. The equivalent Italian yield was trading slightly lower at 4.188 at the same time.

At the same time, the Dutch 10-year government bond yield increased to 3.43%, its highest level since May 2011. Spain’s 10-year yield climbed above 3.80%, its highest level since November 2023.

Investors are concerned that rising energy prices will fuel inflation around the world, potentially prompting interest-rate increases by central banks in the US, Japan and the eurozone, among others.

These concerns were reinforced in the eurozone on Tuesday morning, as the latest flash inflation data from Eurostat showed that energy prices were 14.3% higher than a year earlier. This helped push eurozone inflation to 3.3% in August, up from 2.9% in July. This is significantly above the ECB’s 2% target.

The central bank is due to hold its next monetary policy meeting next week, and most investors are betting on a 25-basis-point rate hike.

Leo Barincou, senior economist at Oxford Economics, said: “With inflation still accelerating, the ECB is all but certain to hike at next week’s meeting, in line with our expectations.”

Looking at the largest European economies, analysts say Germany’s Bund has moved largely in line with global benchmarks, while France faces an additional risk premium because of its political and fiscal outlook.

French 10-year borrowing costs have exceeded Italy’s for much of the summer, as France increasingly replaces Italy as the main focus of European debt concerns.

According to the IMF, France’s gross government debt is projected to reach 118.4% of GDP this year and 120.5% in 2027. France currently has the third-highest debt-to-GDP ratio in the EU, after Greece and Italy.

The Banque de France expects the budget deficit to reach 5.2% of GDP this year. Difficult budget negotiations ahead of the 2027 presidential election have raised doubts about the government’s ability to reverse this trend.

Robert Timper, BCA’s chief fixed-income strategist, previously told Euronews Business: “We have held the view for some time that France is the country in the euro area with the most unsustainable fiscal outlook, and its borrowing cost should reflect that.”

“To get back to a sustainable fiscal path, France needs to do substantial reforms, which will be unpopular as they will curtail welfare spending,” Timper said. “A large political majority is therefore necessary for such reforms, or a bond market riot will force reforms.”

Global bond sell-off

Expectations of persistently high inflation and rising borrowing costs also pushed the yield on 10-year US Treasuries to its highest level since January 2025. The yield on the 10-year Treasury was trading at around 4.78% on Tuesday.

In the US, higher energy prices have added to already stubborn inflation, which remains well above the Federal Reserve’s 2% target. Inflation has weighed on household spending and consumer confidence, complicating the Fed’s decisions on interest rates.

According to Bloomberg, traders raised the probability of a September US rate hike to about 70%, extending a repricing that began last week when Federal Reserve Chair Kevin Warsh doubled down on a pledge to tame inflation.

The sell-off also spread to Asia, where Japan’s benchmark 10-year government bond yield reached 3.00% for the first time since 1996.

Government bonds have traditionally been seen as safe-haven assets during periods of uncertainty.

That role is being tested as investors become increasingly concerned that global conflicts and higher energy prices could produce a prolonged period of stagflation — a combination of high inflation and weak or zero economic growth.

Marking his 100th day in the job, Federal Reserve Chair Kevin Warsh told the Kansas City Fed’s symposium in Wyoming that the US economy has strengthened rather than weakened under recent shocks, that the labour market is consistent with full employment, and that inflation remains the central bank’s dominant concern.

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Warsh declined to say what he would do next month, but he removed most of the arguments against acting and bolstered the ones in favour of a rate hike.

“For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened,” Warsh stated.

“One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient,” he added.

On inflation, Warsh noted that the PCE index stood at 3.7% over twelve months and 4.1% over six, and 54% of the basket’s components rose by more than 3% over the past year, against 32% in the two decades before the pandemic.

Summer readings that beat expectations “do not tell me that underlying trends have meaningfully improved,” Warsh stated.

The Federal Reserve Chair’s conclusion was blunt: “the Fed’s predominant focus right now should be on prices.”

The standard set was equally direct. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh declared.

That assessment matters because it eliminates the case for supporting growth with further stimulus and potentially opens the door for restrictive measures as markets moved in response.

At the time of writing, the 10-year Treasury yield has fallen 0.5% from its Friday high to 4.67% and the 30-year dropped around 0.9% to 5.16%, while the dollar index rose 0.4% from the intraday low to roughly 99.4 points.

Traders raised the implied probability of a 0.25% hike at the 15 and 16 September Fed meeting to 55%, from around 35% before Warsh’s speech.

Performance of the US economy

Warsh opened his speech with what he called a hinge point in history, arguing that artificial intelligence has advanced faster than even its advocates predicted.

Annualised AI token sales at the two leading labs alone exceed $100 billion, he said, up more than 500% in a year.

AI is “a new variable, potentially a new factor of production,” raising questions the Fed cannot answer yet such as whether it will lift productivity and when, whether it complements or replaces labour, and where the returns will ultimately land.

A new Federal Reserve task force on productivity and jobs is examining it, though he stressed its recommendations will have no bearing on current policy decisions.

Warsh then listed extensive evidence for his positive outlook on the US economy.

Business investment in equipment and intangibles growing at around 9%, its fastest since 2021, with more than half of this year’s capital expenditure growth attributable to the AI buildout.

S&P 500 profits went up more than 20% over the year, credit spreads are near historic lows and banks are easing lending standards. Housing and agriculture are strained, Warsh acknowledged, but on balance he “would be hard pressed to describe broad financial conditions as restrictive.”

Unemployment at 4.1% is low by historical standards, with jobless claims near their lowest in decades, leaving inflation as the outlier.

No forward guidance

The Federal Reserve Chair devoted a substantial section to defending his refusal to signal future moves, a stance that has drawn criticism since he took office in May.

Forward guidance was adopted during the 2008 crisis by colleagues including himself, he said, and was essential then, but “the practice has overstayed its welcome” and now “risks creating ambiguity in the name of clarity.”

Warsh warned of a hall-of-mirrors problem in which markets read the Fed while the Fed reads markets, leaving both blind to new developments.

“We should not indulge a regime in which market participants are looking primarily to the Fed for their next trade,” he said, adding that the costs of such errors fall not on “financial high-fliers” but on households facing high inflation or insecure jobs.

Warsh also rejected calls to publish an explicit reaction function, arguing economic knowledge does not permit a mechanical rule.

Instead he set out six principles: interrogate incoming data rather than trust stale figures, accept that judging supply against demand is imprecise; treat the 2% PCE target as firm and fixed; pursue both mandates without treating them as a trade-off; rely on short-term rates rather than unconventional tools; and remember that money itself matters.

“I stand here today committed to a discipline, not to a decision,” Warsh said in closing.

The decision comes on 16 September at the next Fed meeting.

NS&I has just improved the prize draw odds but the personal finance expert has warned over the best place for money

Personal finance expert Martin Lewis has told anyone with Premium Bonds about the ‘£5,000 rule’ and warned about the chances of actually winning anything. The ITV and BBC star has said that unless people have at least £5,000 in there, the statistics suggest they might be wasting their time.

Premium Bonds are a government-backed UK savings product issued by NS&I (National Savings and Investments). Instead of earning regular interest, a person’s money buys unique £1 bond numbers that are entered into a monthly prize draw to win tax-free cash prizes ranging from £25 to £1 million.

Mr Lewis has spoken out about the bonds, and last week, in a new update, NS&I said that there will be an increase to the Premium Bonds prize fund rate and improved odds from the September 2026 draw. There will be an estimated £63 million of extra tax-free prizes in September, compared to August 2026, NS&I said. There is also an immediate interest rate increase for around 428,000 Direct Saver and 222,000 Income Bonds customers.

More than 22 million Premium Bonds holders will see a boost to the prize fund rate to 4.35%, up from 3.80%, for the September 2026 draw. At the same time, holders will have even more chances to win, with the odds shortening to 21,000 to 1 from 22,000 to 1. The Premium Bonds prize fund rate and odds were last improved in July 2026.

However, Mr Lewis has said that people would have a much better return with normal savings – if they don’t put enough money in – because of the odds. He explained that premium bonds are only worth getting if you have a certain amount of money. In particular, he advised that many grandparents would be better off giving grandchildren cash via normal savings accounts.

He said: “For years, many people, especially grandparents, have gifted their children premium bonds. And frankly, in my view, for many they would’ve done better sticking with normal savings. Premium bonds are government-backed savings, where the interest is based on a prize draw. The current prize fund rate is just 3.6 per cent, yet even that overestimates what most people will actually win with typical luck.”

Martin said that premium bonds are typically only worth buying if you have more than £5,000, to give you a chance of winning the prizes. He noted that premium bonds are “best for”: Those with larger savings, say over £5,000, as then you’ve a better chance of earning closer to the published prize fund rate. “With less, the odds are you will win little or nothing”, he said

Those who pay tax on their savings interest, who have used up their ISA allowances, as premium bond winnings are always tax-free

He added: “As most children have small amounts of savings and aren’t taxpayers, premium bonds are particularly unsuitable. Of course, there’s the ludicrously small chance your child will win a million, but they could also toss a coin and it land on its edge.”

“So if you’re thinking of putting £1,000 or less into premium bonds for a child, it’s worth noting that with average luck our premium bonds probability calculator shows they are likely to win nothing over a year (give it a try based on your scenario).”

He has also delivered his assessment of Premium Bonds in general: “Premium Bond prizes aren’t taxed, which means that if you’ve larger savings in cash, and have maxed out your £20,000 a year ISA allowance and earn enough interest to exceed your PSA, Premium Bonds are probably a decent choice… if you can accept the random nature of the ‘interest’.

“For everyone else, cash ISAs – savings accounts you never pay tax on – are still likely to be the better choice. The top easy-access cash ISA rate is currently 4.4% – slightly lower than the standard non-ISA rate, but tax-free and offering a guaranteed return that’s higher than the current Premium Bond prize rate of 3.6% (which you need to be lucky to get).”

He also said the prize rate – 4.35 per cent from September up from 3.80 per cent is the average return. He said: “The smallest prize is £25. So what happens on £100 is a lot of people get nothing and a few get £25.” He said the mena average, which is 4.35 per cent from Sept, but more important: “Is the median average which is zero on £100 in Premium Bonds over a year.

“Median is if you lined everybody up who had £100 in Premium Bonds from those who win the most to those who win the least what would the person exactly halfway along win.

“The first thing to say is someone with typical luck will always win less than the mean average. What affects the amount you win, generally, is the amount you’ve got in. The more you have in the closer you will get to the mean average on typical luck.”

However, the ‘tax-free’ nature of Premium Bonds could offer a benefit, he suggested: “Most people do not pay tax on savings. That’s because, as well as your normal personal allowance up to £12,570 a year you can earn from any source, most people are getting either a £1,000 personal savings allowance – so that’s £1,000 of interest they can earn a year without paying tax on it – or £500 personal savings allowance if you are a higher rate taxpayer.”

If someone has a lot of savings, it could mean they’re paying tax on the interest, and if that’s the case, he said people should consider making sure their ISA allowance is full.

He said: “If you’ve got a cash ISA allowance available, I’d be putting it there. Then, if you’re paying tax on your savings and you’ve filled up your cash ISA allowance, and especially if you’re higher rate taxpayers which means you’re going to be losing 40 per cent off your savings interest on any that you pay tax on, at that point, Premium Bonds even on typical luck at around 3.2 3.3 per cent after tax start to look good value.”

Mr Lewis also urged people to place their savings in high-yield accounts. For those who relish the excitement of potentially winning big, he proposed purchasing a small Lotto ticket: “To all those people who say ‘what about the thrill of winning’, yes there’s the thrill of winning but, you know what, if you put savings account, you’re going to win interest each month and you’ll know exactly how much you’ll be getting and it’ll probably be bigger.

“There is a chance of winning a million, but if you really want to talk about the thrill of winning, then it’s probably far more sensible and more effective for those people who don’t pay tax on savings and who aren’t higher rate taxpayers, to go and put their money in top savings and then take a couple of quid out and put it in the National Lottery and then you get your thrill of winning anyway but you get more return on the underlying savings.”

NS&I responded at the time: “Premium Bonds remain one of the nation’s favourite savings products and are a flexible and fun way to save. They offer the excitement of potentially winning tax-free prizes every month, the safety and security of the 100% government guarantee, and easy access to withdrawals.

“Every Premium Bond has a separate and equal chance of winning a prize each month, however the more Bonds you buy, the better your chances of winning.

“Each month we pay out millions of prizes ranging from £25 to £1 million. In our most recent draw, there were more than 6.1 million prizes worth over £403 million.”

Published on
20/08/2026 – 11:18 GMT+2

The US national debt now stands at a record $40 trillion (€34.4tn), while the Treasury has responded to the bond market pressure by pledging to buy back far more of its own older securities.

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Washington’s two announcements landed on the same day and represent two symptoms of the same underlying strain: a government borrowing at a record pace just as buyers of its longest-dated debt are demanding higher returns to keep lending.

Buybacks work like a targeted repurchase. Rather than printing new money, the US Treasury uses cash it already has to repurchase older, harder-to-trade bonds from investors, improving liquidity without changing the total stock of debt.

From 9 September, the maximum size of each buyback operation in the 10-to-20-year and 20-to-30-year markets will at least double, from $2 billion (€1.7bn) to $4 billion (€3.4bn), running through the next quarterly refunding on 4 November.

The US Treasury said the change reflects “strong sponsorship from market participants” in that part of the curve, but the timing of the decision was no accident.

The 30-year yield had climbed on Tuesday to its highest level since 2007 amid what analysts called a buyers’ strike stretching back to late June, aggravated by a swelling supply of corporate debt tied to AI data centre spending.

Yields duly fell after Wednesday’s announcement, with the 30-year dropping roughly 9 basis points and the 10-year around 6, and Wall Street rallied.

Asked whether Americans should worry about the volatility, US President Donald Trump simply said: “No, I don’t think so.”

However, not everyone is convinced the fix goes deep enough.

The size of the increase is modest next to the $32 trillion (€27.5tn) Treasury market it is meant to steady, and notable economist Mohamed El-Erian suggested the outsized market reaction reflected hopes of broader intervention to come rather than the direct effect of the buybacks themselves.

Thomas Simons, chief US economist at Jefferies, said the announcement broke with Treasury’s usual pattern of steady, well-flagged communication about its borrowing plans and felt “shot from the hip”.

How the US national debt reached $40 trillion

The debt figure, confirmed by US Treasury data covering Tuesday, splits into $32.27 trillion (€27.75tn) held by the public and $7.78 trillion (€6.69tn) owed between government accounts.

It arrived roughly two fiscal years earlier than expected as the US Congressional Budget Office projected in May 2023 that the threshold would not be crossed until 2028, and it came remarkably fast even by recent standards: $39 trillion (€33.5tn) was reached only in March, $38 trillion (€32.6tn) the previous October.

The US government borrowed $1.8 trillion (€1.5tn) in the first ten months of this fiscal year alone, already more than it borrowed in the whole of the last one, as spending on Social Security, Medicare, defence and interest payments continues to outrun revenue.

“The national debt is not just a number on the government’s balance sheet,” said David Young, president of the Conference Board’s CEO Center, noting it shapes the financial decisions Americans make daily.

The two stories feed each other.

A bigger debt load makes investors warier about lending long-term, which pushes yields higher. In turn, higher yields then raise the government’s own interest bill, adding further to the debt the US Treasury has to finance next.

Wednesday’s buyback expansion may ease the immediate pressure, but it does nothing to slow the borrowing driving it.

Published on 18/08/2026 – 12:47 GMT+2•Updated
13:04

Government borrowing costs are surging on both sides of the Atlantic.

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Long-term bond yields across Europe’s biggest economies hit multi-year highs on Tuesday, while the yield on 30-year US Treasuries rose to its highest level in nearly two decades.

The sell-off came as hopes of a swift resolution to the Iran conflict faded, pushing oil prices higher and renewing concerns about persistent inflation. International benchmark Brent crude traded at nearly $91 a barrel on Tuesday morning amid heightened tensions in the Middle East.

“The breakdown in US-Iran peace talks has increased the risk that energy prices remain elevated for the rest of the year, which could keep inflation higher than expected and increase the chance of central banks raising rates,” Richard Carter, head of fixed interest research at Quilter Cheviot, told Euronews Business.

Investors are increasingly betting on tighter monetary policy in the eurozone, with the ECB deposit rate expected to reach 2.76% by March 2027, up from 2.25% currently.

According to Trading Economics, investors see a 90% probability of a September rate hike by the European Central Bank (ECB).

At the same time, in the US, the 30-year Treasury yield reached 5.33%, a level not seen since 2007. In the UK, the 30-year gilt traded at 5.85% — its highest level since May 2026.

As government bonds came under renewed selling pressure globally, France’s 10-year bond yield rose to 4.10% on Tuesday morning, its highest level since June 2009.

Germany’s 10-year Bund yield, the benchmark for the eurozone, climbed above 3.25%, reaching its highest level since March 2011.

France’s 30-year bond yield reached its highest level since 2008, amid a global bond sell-off and growing concern about the country’s 2027 budget negotiations and next year’s presidential election. Germany’s 30-year bond yield rose to 3.78%, its highest level in 15 years.

Rising long-dated bond yields are not driven solely by expectations of higher interest rates and inflation fears.

“Investors are concerned about the scale of borrowing in major economies including the UK, France and Japan,” Carter continued, adding that “significant volumes of AI-related bond issuance have also added to supply, creating further pressure on prices and pushing yields higher.

Higher borrowing costs put pressure on economies and raise financing costs across a range of investments.

As government debt offices constantly raise money through bond markets, the effect of the jump in yields will gradually feed into their borrowing costs as they refinance maturing debt.

Italy is expected to refinance maturing debt equivalent to 17% of GDP in 2026, according to S&P Global Ratings, compared with 12% for France and 7% each for Germany and the UK.

For now, bond markets are likely to remain sensitive to developments in both geopolitics and economic data,” Carter said.

He added that bonds remain attractive to investors because yields are historically high and comfortably exceed inflation, offering a positive return after price rises are taken into account.

Published on
17/08/2026 – 11:40 GMT+2

Two pieces of data collided in Tokyo within hours of each other.

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Bond investors pushed the 10-year Japanese government bond yield to a three-decade high before the government reported that growth had come in at barely half the pace economists had forecast, a pairing that says a great deal about what is really driving Japan’s markets right now.

The economy expanded at an annualised rate of 1.1% in the second quarter, Cabinet Office data showed, well below the 2.0% forecast and down from a downwardly revised 1.9% pace in the first quarter.

Quarter on quarter, GDP rose just 0.3% against a forecast of 0.5%, marking a third consecutive expansion. Private consumption was flat, and capital expenditure fell 1.2%, while net exports, helped by the weak yen, added 0.5 percentage points to growth.

The 10-year JGB yield touched 2.93% earlier in the day, its highest level since September 1996, before easing slightly once the GDP figures landed.

The gap between weak growth and rising bond yields helps explain what is moving Japanese bonds now: not growth, but inflation and the currency.

The GDP deflator rose 2.6% year on year, and traders are increasingly betting that the Bank of Japan will raise its policy rate, currently at 1% and already a three-decade high, as soon as September to contain inflation and support the yen.

Tokyo and Washington spent billions defending the yen

The yen slid to 163.73 per US dollar in late July, its weakest level in roughly four decades, prompting Japan and the US to carry out their first joint currency intervention since 2011.

Japan deployed an estimated $85 billion (€73.3bn) in the first two days alone, while the US intervention was much smaller, according to Goldman Sachs.

The operation pushed the yen back to around 159 per US dollar.

There is currently a wide gap between Japanese and US interest rates, with the Federal Reserve’s benchmark rate still at 3.50% to 3.75%. The Bank of Japan’s September meeting is being watched as the next test of whether the currency’s recovery can hold.

Japan’s bond market matters well beyond Tokyo because of the yen carry trade, in which investors borrow cheaply in yen to fund purchases of higher-yielding assets abroad, from US Treasuries to emerging-market debt.

Rising Japanese yields erode that trade’s profitability and can force rapid unwinding, as it happened in August 2024, when a Bank of Japan rate rise combined with weak US jobs data sent the Nikkei down more than 12% in a single session and knocked roughly 3% off the S&P 500.

With JGB yields at three-decade highs and further tightening still expected, analysts say the conditions for a similar shock have not disappeared.

Published on
11/08/2026 – 13:25 GMT+2

Crude and US Treasury yields rose together as traders judged that the exchange of compensation demands between the US and Iran has pushed any potential deal further out of reach.

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The US president said on Monday he had told his negotiators to seek payment from Iran for Americans killed and wounded in attacks he attributes to Tehran going back decades, including the bombing of the USS Cole in the year 2000 and for Iranians killed in protest crackdowns.

In a follow-up post on Truth Social he expanded on the demand, saying Iran should also pay for “the damages and death caused to the people of Lebanon, Syria, Yemen, and Gaza”.

Tehran, whose representatives had sought compensation for five months of US and Israeli bombardment, says the Strait of Hormuz will stay shut until Washington lifts its naval blockade, ends sanctions and releases frozen Iranian assets.

The front month contract on Brent traded at around $89.8 a barrel on Tuesday and West Texas Intermediate at about $84.2, both up roughly 2.5%.

The US bond market read it the same way, with yields rising across the US curve in a modest global sell-off, the two-year over 4.25%, the ten-year above 4.7% and the thirty-year higher than 5.27%. The yields for all durations are trading at the highs of this year.

Since yields move inversely to prices, the rise means investors are selling government debt as they expect that costlier oil will feed into inflation and strengthen the case for higher interest rates.

Money markets now put roughly even odds on a Federal Reserve rate hike in September, with July inflation data due on Wednesday.

Control claimed, traffic missing

The current stalling of US-Iran negotiations is deliberate as US President Donald Trump appears to have been favouring a slower approach as of late.

The US president told Axios in an interview published on Sunday that the US is “low-keying it,” meaning Washington was only semi-negotiating and content to watch Iran’s inflation and empty coffers do the work, a signal he is prepared to let economic pressure mount rather than order a fresh military campaign.

In the Oval Office on Monday, he struck a triumphant note, claiming the US controls “100%” of the Strait of Hormuz, that only the US Navy holds sway in the region, that American forces have swept it clear of Iranian mines and that the blockade of Iranian ports is impenetrable.

However, shipping data tells another story.

Confirmed crossings have run at 6 to 11 vessels a day recently, against the 130 to 140 daily before the war, according to Kpler data, leaving traffic at a fraction of normal levels throughout the five-month conflict.