The global bond market experienced a sharp selloff as the benchmark 10-year Japanese government bond (JGB) yield surged past 1.5%, reaching its highest level since June 2009 in Tokyo trading on Thursday. This comes just a day after the 10-year German Bund yield—a key global borrowing cost benchmark—saw its biggest single-day rise since the 1990s, triggered by Berlin’s decision to unlock hundreds of billions of euros for defense and infrastructure spending.
Japan’s Bond Yields Reach Multi-Year Highs
The yield on the latest 377th 10-year JGB issue climbed to 1.515%, up from 1.435% on Wednesday, amid speculation that the Bank of Japan (BOJ) will continue raising interest rates.
Other Japanese bond maturities also saw yields surge:
2-year JGB yield: 0.85%, highest since October 2008 (+2 bps)
5-year JGB yield: 1.125%, highest since October 2008 (+5.5 bps)
20-year JGB yield: 2.195%, highest since June 2009
30-year JGB yield: 2.495%, highest since June 2008 (+9 bps)
40-year JGB yield: 2.845% (+1 bp)
BOJ Signals Continued Tightening
BOJ Deputy Governor Shinichi Uchida reaffirmed on Wednesday that the central bank will “continue to raise the policy interest rate and adjust the degree of monetary accommodation” if economic conditions align with projections.
Additionally, Uchida also reportedly said last week that the central bank would keep scaling back its government bond purchases despite the recent rise in yields.
As the central bank resorted to normalizing its ultra-loose monetary policy last year, it stated it would reduce JGB purchases by ¥400 billion per quarter.
Germany’s €500 Billion Spending Plan Sparks Bund Selloff
Meanwhile, in Europe, the German government announced a massive €500 billion ($539 billion) infrastructure and defense spending plan, equating to 12% of GDP. The spending will be exempt from Germany’s borrowing cap, meaning the government will need to issue more bonds to finance the plan—driving yields higher.
The impact was immediate: The 10-year German Bund yields had their worst day since March 1990.
What’s Next?
The global bond market remains under pressure as investors weigh BOJ’s tightening stance, Europe’s fiscal expansion, and the broader impact on global borrowing costs. With major economies adjusting monetary and fiscal policies, volatility is expected to persist across debt markets.
