Global bond yields reach multi-year highs as capital shifts to emerging-market debt
Global government borrowing costs reached multi-year highs on Tuesday, with Japanese, German and French yields climbing. The market shifts accompany strong inflows into emerging-market debt and warnings about euro area exposure to US technology shares.
Economics & Markets··Evening
Rising borrowing costs
Borrowing costs for long-dated government debt climbed globally on Tuesday following the end of the ceasefire between Washington and Tehran. The 10-year Japanese government bond yield reached 2.945 per cent, its highest level in thirty years, while Germany's 10-year yield hit its highest point since 2011 and France's reached a 16-year peak. This move coincided with new Treasury data showing net capital inflows into the United States totalled 133.5 billion dollars in June, led by foreign private investors purchasing 169.8 billion dollars in long-term securities.[1], [2]
Capital shifts
As borrowing costs rise in developed economies, foreign investors have moved capital into emerging-market debt. Inflows into the asset class reached 214.4 billion dollars in the year to July, compared with 177.7 billion dollars during the same period in 2025. Bond issuance in these markets hit a record 187 billion dollars this year, with 19 billion dollars sold in July alone. LGT Capital Partners attributed the performance to investors diversifying away from US Treasuries.[3]
European exposure
The shifts in capital accompany warnings about European exposure to US asset prices. Five European Central Bank economists noted that euro area households hold approximately 440 billion euros of exposure to US technology shares, primarily through mutual and exchange-traded funds. The authors argued that a sharp correction could force these funds to sell liquid assets to meet redemptions, potentially making a US technology stock decline a financial stability issue for the euro area.[4]
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