Global bond markets have all collapsed recently.

This bond market stuff is like the "blood pressure monitor" of the financial markets—it often exposes problems earlier than the stock market. Look at the data—Japan’s 30-year government bond yield surged to 4.18%, hitting a record high; the UK’s 30-year yield jumped to 5.88%, the highest since 1998; Germany and Australia’s 10-year yields also reached new highs since 2011. This is no longer something you can describe as "volatility"—it’s a crash. Bloomberg’s Global Government Bond Index yield has been rising for four straight days, reaching 3.72%, the highest since the 2008 financial crisis.

The most frightening part is U.S. Treasuries. U.S. Treasury yields have held steady at a high level above 5.3%, completely out of control.

Behind it, two things collide:

First: geopolitical conflict. If something happens in the Strait of Hormuz, and two supertankers are attacked, then the U.S. subsequently takes action against Iran’s Qeshm Island. The Strait of Hormuz is the throat of global oil transport—when it’s disrupted, oil prices jump immediately. WTI crude spikes to $88, and Brent rises above $92. Once oil prices rise, inflation can’t be kept under control.

The second thing is what the Fed is signaling. Chair Powell (or “Chair Wosch,” as mentioned) clearly stated that the goal is to rein in inflation. The market understood instantly, and the probability of a rate hike in September jumped from 3% to 66%.

Simply put: inflation is back for round two. Rate-hike expectations rise, and investors疯狂 sell off government bonds, demanding higher yields to compensate for risk.

Here’s a key point many people don’t understand—the yield on U.S. Treasuries is the global benchmark risk-free interest rate, the cost-of-capital floor for all money. Stocks, gold, funds, commodities—everything is priced relative to the yield on U.S. Treasuries. Once this line moves violently, the valuation framework for all global assets has to break down and be rebuilt.

In the bond market, the “big players” are seated—pension funds, insurance companies, sovereign wealth funds. They don’t trade short-term; they track macro data and position for the long run. If economic data shows even a hint of trouble, they rebalance immediately. That’s why the bond market always reacts earlier than the stock market. Stock markets, which are dominated by retail investors, usually lag by half a beat.

There are usually two directions when the bond market sends warnings:

The first kind is an inflation-driven crisis—just like what’s happening today. The bond market falls first. Geopolitical conflicts push up oil prices, inflation won’t be contained, and the central bank is forced to raise rates. Low-interest bonds instantly lose value; institutions scramble to dump them, and yields skyrocket. Today’s script is: U.S. Treasury and Japan government bond yields hit fresh highs first, and only then do the U.S. stock market, gold, and silver plunge. The bond market is the whistleblower.

The second kind is a default-driven crisis—like in 2008 and 2020. Bond prices first surge violently; when the stock market crashes, everyone panics and rushes into the safest U.S. Treasuries for shelter. Treasury prices soar, but yields actually plunge instead.

And what’s most frightening today is the “stocks-and-bonds double kill”—bonds fall and stocks fall too. This means the market fears inflation, so it sells Treasuries; it also fears the economy can’t withstand rate hikes, so it sells stocks. The deeper panic is that stagflation expectations are rising—economic stagnation plus high inflation. This is the nightmare scenario for central banks worldwide. Rate hikes would kill the economy, but not hiking would let inflation eat away at wealth.

Looking deeper: U.S. Treasury debt has already surpassed $40 trillion. The government is borrowing like crazy, so investors naturally demand higher interest as compensation. On top of that, tech giants are issuing debt recklessly to build AI infrastructure, competing for funds with Treasuries and pushing yields even higher.

That ultra-low interest-rate era of the past decade or so may really be coming to an end.