Selling Wave and Rising Borrowing Costs in Global Bond Markets

The accelerating sales wave in global bond markets increases the pressure on public finances.

While borrowing costs have risen to their highest levels in recent years in many countries from the USA to France and Japan, this rise in bond yields also negatively affects other financial assets, including stock markets.

The 10-year US Treasury bond yield, which is considered the main indicator in terms of borrowing costs and asset prices on a global scale, reached 5.34 percent, the highest level since 2002.

Rising interest rates as bond prices decline; It continues to rise worldwide due to rising energy costs fueling inflation, the boom in artificial intelligence and data center investments raising growth expectations, and predictions that short-term policy rates will be permanent.

While rising interest rates increase the financing expenses of companies and consumers using mortgage loans, they also force public administrations to allocate a larger share of their budgets to interest expenses.

The sales wave in the markets is felt more heavily, especially in countries with high debt burdens.

Market actors surpassed their expectations that there would be a rate cut in the US this year.

Following the increase last month, markets are pricing that the American Federal Reserve (Fed) will decide on at least three more interest rate increases by mid-2027.

The European Central Bank (ECB), which has increased interest rates twice this year, is expected to make three more increases of 25 basis points each by the middle of next year.

The developments also shake the stock markets.

According to the AFP agency, the benchmark STOXX 600 index in Europe decreased by 1.2 percent, falling to its lowest level since June; The loss of value in banking stocks reached up to 3 percent.

The high-risk bond credit default swap (CDS) index, which provides protection against default risk in the credit market, also rose to the highest point recorded since the beginning of April.

The selling trend in the markets is deepening due to the ongoing war between the USA and Israel against Iran.

US President Donald Trump's public rejection of Iran's seven-day ceasefire offer dragged down Wall Street indices; The broad-based S&P 500 index finished the day down 0.8 percent.

In European stock markets, London and Frankfurt closed 0.1 percent minus, while Paris remained flat.

Asian markets ended the day on a mixed note as they responded to Washington and Beijing's extension of the trade ceasefire.

Against the backdrop of the strengthening US dollar, gold prices fell from their peaks in the summer months.

While oil prices were above $100 per barrel, natural gas prices increased in Europe.

Average diesel prices in the UK have broken a record, approaching almost two pounds per liter.