Global bond yields hit 2008 highs, raising stakes for big borrowers

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kkaycebasques about 3 hours ago 138 commentsRead Article on reuters.com

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throw0101c•about 2 hours ago

Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds:

* https://www.investing.com/rates-bonds/

zeroonetwothree•about 2 hours ago

Rates also encode inflation expectations. So it may be that inflation is expected higher in the US

Cruncharoo•about 2 hours ago

Sort of. You also have to consider exchange rate futures, the value of the currency you will be getting paid in may change dramatically.

seanmcdirmid•about 2 hours ago

Is the euro doing or expected to do something strange?

Cruncharoo•about 2 hours ago

Not sure, not my domain. My comment was just highlighting that comparing the yields on two sovereign bonds with the same maturity doesn’t necessarily mean one is riskier than the other, there are other factors.

wongarsu•about 2 hours ago

Maybe the USD is expected to lose value against the euro?

mono442•about 2 hours ago

The ECB keeps its interest rate much lower (2,4%) than the FED (3,75%).

tananaev•about 3 hours ago

Finally some evidence that the system is working. Most countries are borrowing like there's no tomorrow, so obviously rates should go up to compensate the risk of not paying back.

smallmancontrov•about 2 hours ago

The system was always working, ZIRP was the market screaming that it had more capital than things to do with the capital. Of course, thinking about this too hard quickly leads to the idea of rolling back some of the enormous tax and policy privileges granted to capital, so it was critical for us to not think about it too hard.

glimshe•about 3 hours ago

And the incredible thing is that yields are quite low based on historical standards. The risk of lending to most countries at yields that are barely above real inflation is massive for portfolio growth.

Let's take the US, where you have to consider lending money to the government for 10 years at 5.009%. This barely covers inflation if you consider real numbers rather than the financial fiction ones that have been published in the last 10-20 years.

In the 90s, an era of relative prosperity when the US was the sole remaining superpower, 5-year treasuries were paying 7-9% with inflation in the 2-4% range!

solatic•about 2 hours ago

> 5-year treasuries were paying 7-9% with inflation in the 2-4% range

One crucial difference: the US wasn't $40T in debt, and it wasn't pulling trillion dollar deficits. In 1998 the US federal government actually had a surplus! Even 9% interest wasn't going to wreck the Federal budget when the overall amount of debt to be serviced was so much lower.

Everything is relative to size. If your older brother lends you a dollar at 100% daily interest, you can still throw a balled-up Jackson at him a couple days later and walk away clean. But ask anyone who agreed to a crazy 20% interest rate on their car loan what it did to their personal finances, and all you'll hear is horror stories. 9% on $40T would be suicide.

zeroonetwothree•about 2 hours ago

Apart from a brief period (which also had higher inflation) yields were more like 6% in thr 90s.

mono442•about 1 hour ago

Yields depend the most on the central bank interest rate. The interest rates are still quite low compared to the past.

epistasis•about 3 hours ago

If you loan the person that prints dollars their own dollars back, there's really zero risk of not getting paid back because they can always print dollars and pay you back. The risk is inflation, same as any currency out there.

I take that back there is a risk they decide to burn trust as someone who doesn't honor deals, which is a new risk that didn't really exist at the nation state level a generation ago...

toomuchtodo•about 3 hours ago

The debtor inflating the debt away is a soft default, even if not a mechanical "true" default of not making a payment.

Yields will rise and reallocation will occur to hedge against this inflation via debasement risk, as investors will manage against inflation adjusted real return versus other investment opportunities.

epistasis•about 2 hours ago

Well just as bad for international lenders as inflation is the devaluation that Trump intentionally caused. We have the worst deficits ever, zero appetite for even acknowledging that there exist, and only massive plans for double digit percentage increases in the deficit on the tab.

It was a mad strategy both cause more inflation with overspending and devalue the dollar! The traditional route for nation state debt management is to grow your economy to make the debt smaller, not make your currency worth less while contracting the economy by deporting a huge chunk of your workers.

method_capital•about 3 hours ago

Working is an interesting term (which I agree with btw) because place like Japan with debt at 200%+ of gdp, rates rising are going to annihilate spending in other important areas.

Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

npongratz•about 2 hours ago

> vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly

I wish you luck. Endless promises and short term thinking are the main things the system incentivizes. Each politician is temporarily renting their seat, paid for by other people. Each bureaucrat is studiously, steadfastly avoiding learning anything that threatens their continued employment, which is paid for by other people.

nemomarx•about 2 hours ago

Eliminate candidates who promise to lower taxes (slows down debt repayment substantially) and those who promise new or expanded services. Who's left? "I'll tax you a little more and not spend that money" is a tough pitch, even if it would be helpful for the debt.

I think Clinton was the last us president to balance the budget and start reducing the deficit so I guess see what he did.

AnimalMuppet•about 2 hours ago

See what Clinton did? Well, he said he'd create a plan to balance the budget. And he did. It was a ten-year plan, and it involved doing very little for the first eight years, and then doing the real work in years nine and ten - that is, after Clinton was out of office, even if he got a second term.

Then 1994 happened, and the Contract With America. The Republicans took both the House and the Senate, and they passed a balanced budget , then, whether Clinton liked it or not.

So that's what "Clinton" did. He pretended he was going to do something, and the Republicans called his bluff, and made him do it.

Note well: Republican majorities in any other set of circumstances have not yielded a balanced budget. I'm not saying that they're the answer (what they did under Trump shows that they very clearly are not the answer for fiscal responsibility). All I'm saying is that "Clinton balanced the budget", while technically true, isn't really the way that played out.

tchalla•about 1 hour ago

Japan’s debt is mostly held local unlike some other countries.

LPisGood•about 1 hour ago

The US’s most important export for many years was treasury bonds. As de-dollarization occurs, the United States is bound to face some economic reckoning.

It should be noted that even still almost all US debt is held locally.

LPisGood•about 2 hours ago

“Promise endlessly” is an oft touted criticism of social safety net programs, when the reality is that reducing vast tranches of corporate welfare is typically more than enough to solve budget shortfalls.

sph•about 2 hours ago

> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

Maybe we should consider the possibility that there is no such candidate, or if there is, they cannot compete against the 'populists'. What then?

lordnacho•about 3 hours ago

> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

Who could you vote for, in any democracy, that would fit this?

Also, how many voters would have the wherewithal to identify such a person?

wongarsu•about 2 hours ago

Some green parties. Their primary goals might seem unrelated, but turns out caring for the environment and climate change is correlated with long-term thinking.

Note I said "some", before rushing to mention all the examples of green parties engaging in misguided policies. Those also exist

In the anglosphere it's more difficult because first-past-the-post voting makes such parties unlikely to succeed or be relevant

idiotsecant•about 2 hours ago

I think democracy is perhaps a fundamentally unstable system. It requires constant corrective force, and a lot of it, from a lot of people. When the members of that democracy start to get a little too comfortable it fails.

Humans are designed to operate in smallish clans with benevolent dictators whose right to rule is based on social currency with people they personally know. Anything else is a house of cards on unstable foundation.

I'm not sure how you fix that, but democracy so far has maybe been the least bad patch.

bradleykingz•about 2 hours ago

conservatives?

huurtehoog•about 2 hours ago

Japan is closer to 130% debt-to-gdp. The 200% number is based on gross debt and ignores some other mitigating factors for shock value.

method_capital•about 2 hours ago

Great.

Rates going higher increases interest expense materially. You either rack new debt or you cut in places that are uncomfortable. The point is: responsible leadership in the developed world has gone mia for decades. There's a price to be paid that's real.

rdm_blackhole•about 1 hour ago

> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

These people do not exists. If a politician ran on such a platform, they would never get elected.

The fact is in modern democracies like in the EU or in the US there are simply too many people who rely on the status quo directly or indirectly.

Its almost comical, in France politicians have run, got elected and have swept the debt problem under the rug for the last 40 years, then they leave office and suddenly decide that the debt is a massive problem but that there was nothing they could do about while in office so they never did anything but now they speak about it.

And they all do it. Left, right, center, it's all the same.

outside1234•about 2 hours ago

More likely they are going to "monetize" the debt. Aka print yen to pay it off.

smallmancontrov•about 2 hours ago

> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

Conservatives:

    +-------------------------+----------------------------------------+
    | President Name          | Deficit Increase (+) or Decrease (-)   |
    +-------------------------+----------------------------------------+
    | Donald Trump (2nd term) |                                    N/A |
    | Donald Trump (1st term) |                                 +11.1% |
    | George W. Bush          |                                  +4.3% |
    | George H. W. Bush       |                                  +1.8% |
    | Ronald Reagan           |                                  +0.5% |
    | Gerald Ford             |                                  +0.8% |
    | Richard Nixon           |                                  +0.7% |
    | Dwight D. Eisenhower    |                                  -1.8% |
    +-------------------------+----------------------------------------+

Liberals:

    +-------------------------+----------------------------------------+
    | President Name          | Deficit Increase (+) or Decrease (-)   |
    +-------------------------+----------------------------------------+
    | Joe Biden               |                                  -5.7% |
    | Barack Obama            |                                  -6.7% |
    | Bill Clinton            |                                  -6.1% |
    | Jimmy Carter            |                                  -0.1% |
    | Lyndon B. Johnson       |                                  +1.9% |
    +-------------------------+----------------------------------------+

Deficit rate = (federal outlays - federal receipts) / GDP. Change = deficit rate in final fiscal year - deficit rate in first fiscal year. The % symbol below means percentage points of GDP, not relative percent change. The first and last fiscal years whose end dates occurred during each presidency are used. Transition fiscal years can therefore span two administrations. Figures are OMB actuals through FY2025 and are rounded to 0.1%.

cyanydeez•about 2 hours ago

you don't think what they promise is important?

Just seems like one of those weird ambiguities.

kingleopold•about 2 hours ago

japan is an empire, longest one too, you can't vote for that LMAO

AnimalMuppet•about 2 hours ago

Except that the emperor doesn't actually rule Japan - the Diet does, and you can vote for them.

whatever1•about 3 hours ago

There is 0 risk to getting repaid from the US. We will print for the lenders the exact amount they are promised.

Promises kept. All is good

grey-area•about 2 hours ago

What could possibly go wrong.

Nobody has ever tried this before!

andrewmutz•about 3 hours ago

Printing money causes inflation and inflation causes increasing interest rates. It is possible to enter a positive-feedback cycle, and has happened to countries before.

I'm not predicting that this will happen, but we do need to take the debt seriously and not assume we will be able to just print money to get rid of it.

llm_nerd•about 2 hours ago

I feel like there is an inside joke here, so I apologize if I am being a bit spectrum-y taking it at face value.

Every sovereign can print money and repay lenders, but doing so cause an inflationary cycle. When it looks like that is inevitable, borrowing rates start spiralling, so you have to print more money, and soon you are Zimbabwe.

Like the US is catastrophically indebted -- both parties have been negligent on this, though one party has been much, much worse than the other -- and right now there's a certain defeated malaise about 40T in debt. The last time bond rates were this high the country had only $6T in debt, and even that was considered a catastrophic level, and bond rate trends are...not looking good for those want government funds leftover after servicing the debt.

"Oh but we'll just grow the economy..."

The debt has grown by 6.5x, and the GDP has grown by 2.8x since 2002. The math just isn't mathing. And remember that bond prices were historically low, and if there was ever a time to pay down the debt....

Nope, $2T deficit, "hide in the ballroom bunker and hold the world hostage with the nuclear launch button" projects, and now a hilarious $1.3T bribe to voters. Utterly busted. It is astonishing that it took this long for the world's lenders to chuckle and say nah.

fragmede•about 2 hours ago

The math that isn't mathing is that GDP needs to stop being the number we look at. Goodhart's Law says that "When a measure becomes a target, it ceases to be a good measure." and GDP is no exception. If I pay a cleaner $200 to clean my home, that's $200 into the GDP. If I do it myself, that's not reflected in the GDP. If I buy a robot maid, pay for it once, and it cleans my apartment for me, thats an ongoing quality of life improvement that's not going to be reflected in the GDP. If that $50,000 robot maid frees up 10 hours/week for me to do other stuff, GDP might actually fall instead of rise.

whatever1•about 2 hours ago

Not sure it plays out that determistically. If the gov prints money to just payoff debt without increasing the government spending, there is no new money entering the market.

You just pay off old promises that were expected to be kept.

The real risk is that new lenders will not be willing to lend you, yes. But not outright inflation.

ajross•about 2 hours ago

> the US is catastrophically indebted

Debt service costs as a percent of GDP are in fact lower than they were in the 1980's, when things came out fine. Is this the best way to run the budget? Likely no. Should we make policy changes? Certainly yes.

Is the best way to drive that policy argument flinging around adjectives like "catastrophically indebted". No. If you have a suggestion make a suggestion. Screaming about "The Problem" without discussing policy is echo chamber logic.

rob74•about 2 hours ago

One contributing factor might be that AI companies are raising money via (amongst other methods) also issuing bonds, which might compete with government bonds.

HappySweeney•about 3 hours ago

It isn't the debt levels that are causing the rates to spike, rather the start of the emerging Bretton Woods III era.

AnimalMuppet•about 2 hours ago

Could you be a bit more specific about what you think "Bretton Woods III" is?

sph•about 2 hours ago

Not sure what GP meant, but I found this googling that term: https://static.bullionstar.com/blogs/uploads/2022/03/Bretton...

eggplantemoji69•21 minutes ago

Curious to see what transpires with federal fund rate alteration in the acute future.

Both Warsh and Bessent are pupils of Druckenmiller, but Warsh seems aligned with Druckenmiller regarding letting the market naturally settle on appropriate bond yields, whereas Bessent is being a Trump puppet and attempting these various failed interventions to artificially lower yields.

I hope Warsh stays strong and doesn’t bend the knee!

2OEH8eoCRo0•about 3 hours ago

"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."

- James Carville

rdm_blackhole•about 2 hours ago

France is in a dire situation right now.

10y OAT are at 4.5% and rising with almost 100bps difference with Germany and no budget for 2027 since there is no majority in the parliament.

There is also a 6% deficit expected and growth has been revised down to 0.4% although during the first 6 months of 2026 there was actually a decrease of 0.2% of GDP in total so finishing the year in recession is totally possible.

Unemployment could also reach around 9% (15% in real terms if you count the people who have given up and/or been removed from the stats since they ran out of benefits).

Finally gasoline could reach 3 euros/liter (USD $13 per gallon) before the end of the year (already sitting at 2.5 euros/liter in many parts of France right now).

stymaar•about 1 hour ago

And don't expect any debate on economic policy in the next presidential campaign either… It's just going to be “should we tax the billionaires” vs “should we save a few basis points of GDP in pensions”, none of which is remotely close to the order of magnitude that's needed to put the country back on its feet.

dgellow•about 1 hour ago

It will be all about immigration and cost of life crisis. And of course the general finger pointing at the EU bogeyman

rdm_blackhole•31 minutes ago

I am not expecting anything. I left France a long while ago and I am not planning on coming back anytime soon except for holidays.

> the order of magnitude that's needed to put the country back on its feet

The amount of reforms needed in France could fit in an encyclopedia. LFI or the RN will not fix this mess and the center who has been in power for 10 years is all but useless. The old center-left and center-right parties have all been in power also and led us to this place which means that are not the solution either.

Seems to me that France is well and truly stuck on a slow but certain decline. But the other EU countries are not doing much better either.

kingleopold•about 2 hours ago

more social security will fix this I think? they need to spend 100Billion more on that so long term they can go into more debt.

podocarp•about 2 hours ago

Turns out countries with constitutions forbidding excessive debt are quite smart. It's like phone addiction -- if the parents don't lead by example and strictly enforce "no phones at the dinner table" then slowly it's just gonna creep back in and everyone's just staring at their phones again.

Synthetic7346•about 2 hours ago

Not working so well for Germany

https://youtu.be/ajH6YVhdOZU?is=Xht8Qsd_eGqnS7wW

pjc50•about 3 hours ago

The war(s), especially with the impact on pipelines and the Houthis taking over more of Yemen, are finally affecting fuel prices and hence turning the global economic outlook less positive.

You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.

whateveracct•about 3 hours ago

Not just reserves, but also all the oil already on ships slowly making its way to its destination. I think I even saw someone predict that around September, the oil issue would get worse due to how slowly those ships move.

Onewildgamer•about 2 hours ago

Are you referring to this https://www.youtube.com/watch?v=Jf3rHAXOZj0

danans•about 3 hours ago

> You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.

What's different between the two is that apparently China hasn't made an equivalent dent in its oil reserves, despite no significant reduction in travel, and despite reducing its import demand by 1 OPEC.

It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.

Apparently the main reason they have started buying crude again is not for internal consumption as much as taking advantage of the massive crack spread in refined petroleum products (like diesel) which they export.

ethagnawl•about 2 hours ago

> It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.

From a distance, those look like pretty sound theories.

It's wild that the pols and talking heads in the US have been screeching about how "dangerous" China is since the 90s (I remember family members making crude jokes about why I should be learning Mandarin instead of Spanish in middle school) and, yet, here we are doing everything we can to hand them the reins of world power.

pjc50•about 2 hours ago

> China hasn't made an equivalent dent in its oil reserves

I think the easiest explanation is that this probably isn't true. The US SPR is underground, it would be quite easy for China to manage its equivalent in secret, for whatever reasons.

The Chinese EV shift is real and significant, though.

debo_•about 1 hour ago

> massive crack spread

skybrian•about 2 hours ago

They have different kinds of risk, but do AI investments and bonds compete for investors?

neilwilson•about 2 hours ago

Only in the secondary market. In the primary market they require different types of money for settlement.

If you buy an AI issue, then the AI company has the bank deposit and the bank still has the matching reserves needed to buy government bonds in the primary market. All that changes is the ownership tag on the bank deposit.

skybrian•about 2 hours ago

But looking one step back, the investor might need to sell something else to raise cash to buy the stock?

I suppose in that respect, all investments compete.

huurtehoog•about 2 hours ago

Yes there's only so much credit on offer and the rising yields precisely when corporate debt is skyrocketing to finance massive data center expansion would indicate that that is indeed a factor.

Op-eds claiming the opposite because "trust me bro" would also make me inclined towards the "data center build out for AI factors in for rising yields in sovereign debt"

pydry•about 2 hours ago

iirc data center construction investments are largely bond funded so this will absolutely fuck them.

unddoch•about 2 hours ago

It becomes clearer to more people that it's impossible to predict the future shape of the global economy due to AI.

The more clear it is, the cheaper 30 year bonds become.

sekai•about 2 hours ago

> It becomes clearer to more people that it's impossible to predict the future shape of the global economy due to AI.

You mean due to Trump? Tariffs and Iran war caused this.

32oqa9•about 2 hours ago

The US will continue to starve the world of oil and natural gas as long as the stock market goes up.

Notice that the stock market is at all time highs because 50% of the economy is grift now and not real. That is why Republicans go into vast deficit spending to pump up AI and worthless "high-tech", "disruptive" defense stocks.

Trump (and British pound saboteur Bessent) don't care one bit if the US plebs and the rest of the world suffer. The game is printing money, give it to grift companies like AI, have family invest early and get out if everything collapses. Probably they get into real estate cheaply due to foreclosures.