European Bond Yields Hit Multi-Year Highs Amid Global Sell-Off
German 10-year Bund yields reached 3.5% Friday morning as global inflation fears drove borrowing costs to multi-decade peaks across Europe and the US.
Germany’s 10-year Bund yield stood at 3.5% on Friday morning. French 10-year yields reached 4.44%, while Italian yields hit 4.37%. These figures mark multi-decade highs for European government borrowing costs. The rise follows a sharp increase in global bond yields driven by inflation concerns.
The European Central Bank raised its deposit rate from 2.25% to 2.5% on Thursday. The bank warned that inflation could remain well above target for an extended period. This hawkish stance led investors to expect further rate hikes. Consequently, borrowing costs for governments and corporations have risen rapidly.
Energy Conflict Drives Inflation Fears
Escalating conflict in the Middle East has worsened the outlook for crude oil supplies. Yemen’s Houthi rebels attacked Saudi energy targets and advanced toward the Bab el-Mandeb Strait. The Strait of Hormuz remains effectively closed due to fighting between US forces and Iran. Brent crude traded above $100 per barrel, with front-month contracts near $106.
Higher energy prices threaten to keep inflation elevated in Europe. Investors fear this will force central banks to tighten monetary policy further. The UK’s 10-year gilt yield eased to 5.35% on Friday after peaking at 5.378% on Thursday. Long-term US Treasury yields also reached new multi-year highs following data on rising wholesale inflation.
Global Debt Markets Face New Pressure
The 30-year US Treasury yield climbed above 5.38%, its highest level since 2007. The 10-year US Treasury yield approached 5%, trading at 4.95% in Europe. The US Treasury bought back $5.2 billion of bonds, less than half the $10.5 billion offered by investors. This operation was below the $6 billion cap, adding pressure to the market.
Japan’s 10-year government bond yield rose to 2.98%. This is just below the 3% level reached earlier this month, a first since 1996. According to GN auto markets/bonds: bond yields, these movements reflect a broad global sell-off. Investors are repositioning portfolios in response to persistent inflation risks and geopolitical instability.
AI Debt Competes for Capital
Governments face competition for investor capital from artificial intelligence-related debt. Major tech firms issued over $200 billion in debt in 2026. This is more than double the amount raised in the previous year. Goldman Sachs estimates AI-related issuance at nearly $500 billion by early August.
US technology companies are increasingly using the eurozone bond market for financing. They expect to require over $1 trillion in capital expenditure by 2028. The euro accounts for close to 10% of outstanding bonds issued by these hyperscalers. This influx of corporate debt provides European investors with greater exposure to technology infrastructure.
