01.09.2026 - Yields - Higher and Higher
Global bond yields have climbed to their highest levels since 2008, as rising oil prices fuel renewed inflation concerns and Fed Chairman Kevin Warsh’s hawkish stance pushes markets to price in further monetary tightening.
In Japan, the 10-year government bond yield reached 3.0% for the first time since 1996, while US Treasuries remain under significant pressure. The US 30-year Treasuries are experiencing its worst run since 2006.
Importantly, US yields have now moved clearly above the levels seen before Treasury Secretary Scott Bessent’s recent interventions in the bond market. The temporary relief has effectively disappeared.
As yields rise, bond prices fall. With investors increasingly expecting yields to move even higher, selling pressure in the bond market is building as investors try to avoid further price losses. This creates the risk of a self-reinforcing dynamic: further bond selling pushes prices lower and yields even higher.
Inflation is adding further pressure. Eurozone annual inflation accelerated to 3.3% in August from 2.9% in July, making an ECB rate hike in September increasingly likely.
Markets:
Equities: Global stocks moving lower
Bonds: yields moving higher - US 10y yield 4.79%, Japan 10y yield 3.0%
Commodities: Oil prices moving higher, WTI around USD 87/barrel and Brent around USD 92/barrel
Precious metals prices lower, gold at USD 4’375/oz, silver falls below USD 65/ozCurrencies: US dollar slightly higher - Japanese Yen falls again, USDJPY 160
Cryptos: - Bitcoin back below USD 78k
Volatility: The VIX index slowly moving highe towards 16 (still good opportunity for hedging)
My View: I started highlighting the trend toward higher yields early, and it seems investors are finally beginning to recognize the reality.
As mentioned repeatedly, investors focusing purely on equities while ignoring the macro picture and developments in other asset classes could be making a serious mistake. Yield levels like these cannot simply be ignored. And neither can what is happening inside bond portfolios.
Bonds are generally classified as lower-risk investments because they typically experience less volatility than equities and, when held to maturity, provide a defined return through coupon payments and repayment of principal.
However, during periods of persistently rising yields along the whole yield curve, bond prices fall, moderately at the short end, but potentially significantly at the long end of the curve.
This matters because conservative and risk-averse investors traditionally hold substantial allocations to bonds. Many of these investors are therefore losing money precisely in the asset class they consider the defensive part of their portfolios.
For much of the period between the Global Financial Crisis and the Russia-Ukraine war, investors operated in an environment of declining yields and disinflation. Falling yields pushed bond prices higher and generated attractive returns for bond investors.
Today, that mechanism is running in reverse with expectations:Higher inflation → higher yields → lower bond prices → negative returns in bond portfolios.
At the same time, higher government yields increase refinancing costs and accelerate the debt problem. The debt spiral is not moving in the right direction, and it is gaining speed.
This becomes particularly important as we enter September, historically one of the more difficult months for equity markets, with midterm-election years deserving additional attention.
The key message remains unchanged: yields are at dangerously high levels, bond markets continue to flash warning signals, and the pressure from debt, inflation and refinancing costs is increasing rather than disappearing.
This is one of the major risks I have highlighted for some time, and one of the reasons why I remai mainly positioned for falling markets.
Become a member to access more valuable market updates like this
