Global Government Bond Yields Hit Multi-Decade Highs

Key arguments

• The rise in U.S. 10-year yields and curve flattening in September is almost entirely explained by higher Fed rate expectations, which J.P. Morgan views as appropriate rather than overrun.
• Treasury buybacks (doubling to at least $4bn per operation) and possible long-end auction cuts likely have only temporary effects, as seen in the U.K. and Japan, and could raise term premium if debt management becomes opportunistic.
• Euro and UK intermediate yields reflect both tighter policy expectations (ECB to 2.75%, one more hike in Q1 2027) and higher neutral-rate expectations from AI-driven productivity, plus an energy risk premium.
• Rising yields can become self-reinforcing, raising government, corporate and consumer borrowing costs, widening deficits and pressuring equity multiples past an inflection point.

Corresponding source evidence

1. Recently, however, the Treasury Department has taken the initiative to intervene, announcing that it would at least double the maximum amount of long-dated U.S. government debt it can buy back from $2 billion to at least $4 billion per operation in an effort to tamp down bond yields.
2. Some market participants believe that Treasury could cut long-end auction sizes in an effort to reduce supply of Treasuries and thus potentially reduce long-end yields.
3. Morgan Global Research forecasts the ECB to raise rates once more this year to 2.75%, and then hike once more in the first quarter of 2027. · 2027