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Surging Bond Yields Spark Global Debt Sustainability Crisis
6 Sep
Summary
- Rising government bond yields increase debt servicing costs
- Upward pressure on long-term yields worsens debt dynamics
- Mortgage rates expected to rise, constraining private sector
In September 2025, the global bond market has been in turmoil, with rising yields posing a significant challenge to debt-laden economies around the world. According to analysts, this "slow-moving vicious circle" has seen government bond yields increase, driving up the cost for nations to service their debts at a time when many major economies are struggling to reduce fiscal deficits.
The upward pressure on long-term bond yields, as investors demand higher risk premiums, has further worsened debt dynamics in countries like the U.S., the U.K., France, and Japan. This volatility has led to record-high yields on 30-year bonds in Japan and the U.K., as well as the U.S. 30-year yield briefly exceeding 5% for the first time since July.
The impact of these rising borrowing costs is expected to be felt across the wider economy, particularly in the mortgage market. With 30-year mortgages being a popular choice in the U.S., the surge in the 30-year Treasury yield is a significant concern for homeowners. Analysts warn that this could further constrain the private sector, as higher mortgage rates weigh on consumer spending and business investment.
Despite the recent easing of yields, government borrowing costs remain far higher than a few years ago, and traders will continue to monitor the knock-on effects on the economy as fiscal challenges persist.
