Long-term government bond yields are rising in major countries, including the United States, raising concerns about interest rate trends. This increase is attributed to expanded fiscal spending and a rise in government bond issuance, while demand from central banks and foreign investors has weakened. Analysts suggest that inflation fears are prompting long-term bond investors to seek higher yields.
According to the International Financial Center on September 28, the recent rise in global long-term interest rates is linked to increased fiscal spending, a surge in government bond supply, and a decrease in purchases by central banks and foreign investors. Additionally, concerns over inflation are leading to greater demands for compensation from long-term bond investors, making a return to the ultra-low interest rate environment of the past unlikely.
In the U.S., inflation and employment indicators are seen as key variables influencing monetary policy. The core personal consumption expenditures (PCE) price index for August, set to be released on September 30, is expected to show a 3.4% increase year-over-year and a 0.3% rise from the previous month. The possibility of an additional rate hike in October is also being discussed in the market. Conversely, if the increase in non-farm employment slows in September, it may reduce pressure for rate hikes.
There are concerns that high bond yields could constrain further rate increases by the Federal Reserve. The International Financial Center noted that key rates, including the 10-year Treasury yield, have already risen to high levels, and prolonged weakness in sectors like housing could complicate the case for additional rate hikes.
If the rise in long-term interest rates persists, it could increase borrowing burdens for households and businesses. Bloomberg has suggested that if the increase in government bond supply continues alongside weakened demand, high bond yields could become the 'new normal.' Prolonged high bond yields could lead to increased pressure on households and businesses due to rising borrowing costs, although it may benefit savers.
Changes in the yield curve are also noteworthy. Recently, the gap between the 10-year and 2-year Treasury yields in the U.S. has narrowed, raising concerns about a potential yield curve inversion. Historically, yield curve inversions have served as a leading indicator of economic recessions, but recent assessments suggest that their predictive power may have diminished.
As of September 25, the yield on the U.S. 10-year Treasury bond was 5.16%, up 16 basis points from the previous week. Yields on 10-year bonds in Germany and Japan also rose by 8 basis points and 9 basis points, respectively. During the same period, the dollar index increased by 0.75%, and the Korean CDS premium rose by 3 basis points.
Meanwhile, amid ongoing geopolitical uncertainties, including negotiations between the U.S. and Iran, market participants are increasingly focusing on inflation, monetary policy, and the supply-demand conditions of government bonds as key factors influencing financial markets.
* This article has been translated by AI.
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