The global bond market is sharply divided based on inflation, fiscal conditions, and economic performance. While the U.S. 10-year Treasury yield has risen to around 5.3%, China's remains in the 1% range. In France, fiscal instability has widened the yield gap with Germany to its largest level in 14 years.
According to the International Financial Center, the yield on U.S. 10-year Treasury bonds reached 5.30% during the auction on October 7. Prior to the auction, market yields surged to 5.36% but later closed at around 5.29% as buying interest emerged. The bid-to-cover ratio was 2.77, the highest since 2016.
The primary driver behind rising U.S. Treasury yields is renewed inflation concerns. A survey by the New York Federal Reserve indicated that one-year inflation expectations rose to 3.9%, up from 3.6% the previous month, marking the highest level since May 2023. Three-year inflation expectations also increased from 3.2% to 3.3%.
The possibility of further tightening by the Federal Reserve is also limiting declines in interest rates. Minutes from the September Federal Open Market Committee (FOMC) meeting revealed that a majority of members deemed an additional rate hike appropriate within the year. The expansion of AI investments and high energy prices could exert new upward pressure on inflation.
Market forecasts suggest that high interest rates may persist. Barclays has raised its forecast for the U.S. 10-year Treasury yield in the third quarter of 2027 from 5.00% to 5.25%, indicating that it is unlikely to fall below 5% in the near term.
In Europe, fiscal instability remains a concern. The yield gap between French and German government bonds has widened to 1.6 percentage points, the highest in 14 years. Italy's national debt has reached 139% of its GDP, raising concerns that continued rate increases could lead to higher interest burdens.
In contrast, China's 10-year Treasury yield remains at around 1.7%. Weak consumer demand and sluggish real estate recovery have hindered economic growth, while funds from households and banks are flowing into government bonds, keeping yields low.
With U.S. yields at 5.3%, China's at 1.7%, and the France-Germany yield gap at 1.6 percentage points, the disparities in government bond yields reflect differences in inflation, fiscal health, and economic strength among major countries. The likelihood of continued differentiation in global bond market rates remains high.
* This article has been translated by AI.
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