Bond market sell-off: Yields rise to multi-year highs

The sell-off on the bond market continues: The yield on ten-year US bonds rose to 5.34 percent on Thursday, the highest level since 2002. The yield on British bonds with a term of 30 years rose to 6 percent, a record since 1998.

The background to the sell-off is concerns about inflation as a result of the Iran war. As consumer prices rise as oil prices rise, economists expect higher and longer-lasting inflation as well as rising key interest rates from central banks. Investors are selling bonds and investing in new securities with higher interest rates, which causes the prices of existing bonds to fall and yields to rise.

There are also concerns about growing debt in some industrialized countries, especially the USA. The mountain of debt there recently exceeded the $40 trillion mark. High interest rates are a huge problem for governments as they make it much more expensive to take on new debt.

The US government has recently tried to push down the yield on US government bonds in order to make debt service cheaper. With the announcement that it wanted to buy more of its own bonds in the future, the US Treasury Department was only able to temporarily lower yields slightly.

Even Germany, with its federal bonds that set the trend on the financial markets, is not spared from the sell-off. The yield on ten-year federal bonds, on which building interest rates are based, rose to 3.61 percent. At the end of February it was only around 2.6 percent. If bond yields rise, taking on new debt becomes more expensive. Finance Minister Lars Klingbeil (SPD) already has to save money.