bonds

​Global bond markets came under renewed pressure on Monday as a sharp rise in oil prices intensified concerns that inflation could remain stubborn and force central banks to keep interest rates higher. Short-term borrowing costs in Europe and Japan climbed to multiyear highs.
The selloff accelerated after Brent crude rose above $90 a barrel amid renewed military action between the United States and Iran. The oil move added another inflation risk just as investors were reassessing the outlook for monetary policy following Federal Reserve Chair Kevin Warsh’s Jackson Hole speech, Reuters reported.
Bond yields climb across major markets
Japan’s two-year government bond yield reached its highest level in 31 years, reflecting expectations that inflationary pressure could keep the Bank of Japan on a tighter policy path. In Europe, two-year German and French yields climbed to their highest levels since 2024.
Pressure extended further along the European yield curve. Longer-dated euro-area yields reached their highest levels in more than 15 years, continuing a broader rise in borrowing costs that has gathered momentum in recent weeks.
The latest oil shock gives bond investors another reason to demand higher yields. More expensive energy can feed into transportation, manufacturing, and consumer costs, complicating efforts by central banks to bring inflation sustainably under control.
The European Central Bank is widely expected to raise rates at its September 9-10 meeting, adding to the pressure on government debt.
Fed expectations add to selling pressure
The repricing has also reached U.S. monetary policy. Markets now assign roughly a 60% probability to a Federal Reserve rate increase in September, up from less than 50% last week.
Warsh’s Jackson Hole remarks reinforced expectations that the Fed could respond more aggressively if inflation remains elevated. Barclays now expects quarter-point increases in both September and December, while some economists continue to see December as the more likely starting point.
Stocks reflected the same caution without matching the scale of the bond move. Europe’s STOXX 600 slipped about 0.2%, while U.S. equity futures edged lower. Gold, meanwhile, was heading toward its strongest monthly performance since January.
Higher yields raise the stakes for markets
The combination of rising energy prices and hawkish central-bank expectations leaves bonds exposed to further selling if inflation risks intensify. Brent above $90 has become particularly important because another sustained energy shock could undermine assumptions that price pressures will continue easing.
For investors, the next question is whether higher yields represent another temporary geopolitical shock or the beginning of a more durable repricing of global interest rates.
We have previously highlighted that U.S. Treasury Secretary Bessent urges the G20 to increase pressure on China.
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