Interest rates on sovereign bonds from various Western countries are approaching multi-year highs, including in Portugal, as investors increasingly consider a further policy rate hike likely to combat inflation, against a backdrop of elevated geopolitical uncertainty and growing investment in the artificial intelligence sector.
Interest rates on Japanese bonds are particularly noteworthy, having reached 30-year highs at 3% in 10-year maturities. UK 10-year gilts surged 9 basis points to 5.234%, the highest level since June 2008, while 30-year maturities reached approximately 5.886%, the highest value since 1998.
In the US, 10-year Treasury bonds touched 20-month highs, climbing 3 basis points to 4.788%. German 10-year bunds rose more than 3 basis points to 3.355%, a new one-year high. In France, 2-year bonds renewed April 2024 highs at 3.139%, and Portuguese 20-year bonds approached nearly decade highs, climbing more than 3 basis points to 4.262%.
The bond markets were back in the spotlight after the resumption of hostilities in Ormuz, with Americans and Iranians exchanging fire for the first time in several weeks. Investors are increasingly inclined towards further policy rate hikes due to inflation persistence in the eurozone, US and UK, a possibility reinforced by comments from US Treasury Secretary Scott Bessent on the need for the Bank of Japan to raise interest rates. There is also concern that, with yields above 3%, large Japanese financial agents will abandon US Treasury bonds in favor of the domestic market.
