A sweeping selloff in long-dated government bonds has pushed yields around the world to their highest levels since the global financial crisis. The US 30-year Treasury yield has breached 5.20% for the first time since 2007, UK gilts have reached levels not seen since 1998, and Japan’s 30-year bond yield has hit an all-time record. What began as an oil-driven shock from the Iran war and Strait of Hormuz disruption has evolved into a broader repricing of inflation risk, fiscal sustainability, and the entire trajectory of monetary policy in 2026.
Key Overview
- US 30-Year Treasury: Yield hit 5.20%, the highest since July 2007, up nearly 60 basis points since the Iran war began
- UK 30-Year Gilts: Rose to 5.77%, the highest since 1998, with Britain overtaking Australia as the highest-yielding developed market at that tenor
- Japan 30-Year Bonds: Reached an all-time record high, the highest since the series began in 1999
- Global Index: Long-duration bond index has swung from +3% in late February to –4.6% year-to-date
- Oil Trigger: Brent crude above $110 per barrel following Strait of Hormuz disruption
- Fund Manager Outlook: 62% of Bank of America survey respondents expect US 30-year yields to reach 6%
A Global Repricing, Not Just a US Story
The selloff in long-dated government bonds has become unmistakably global. According to Bloomberg data, the average yield on sovereign debt maturing in 10 years or more has climbed to its highest level since July 2008, as investors demand greater compensation to hold longer-maturity paper. The move reflects a market that is simultaneously repricing inflation expectations, fiscal risk, and policy uncertainty.
The immediate catalyst has been the Iran war and the disruption to the Strait of Hormuz, which has sent Brent crude above $110 per barrel. But the repricing has spread well beyond energy. Investors now fear that elevated oil prices will feed through to transport costs, food prices, manufacturing inputs, and airfares — creating a persistent inflationary impulse that central banks cannot easily dismiss.
US Treasuries: 30-Year Yield Hits 5.20%
The clearest example of the rout is in the US Treasury market. The 30-year yield rose to 5.20% on May 19, its highest level since 2007 and the eve of the global financial crisis. The 10-year yield climbed to 4.687%, its highest since January 2025.
The move has been dramatic in both speed and scale. When the Iran war began in late February, traders anticipated as many as three Federal Reserve rate cuts in 2026. Markets have now swung to pricing a potential rate hike, possibly as soon as year-end. “The market has swung to a clear hiking bias,” said Benjamin Schroeder, senior rates strategist at ING, citing concerns that “energy price pressures morph into something more than just a short-lived inflationary episode.”
A mid-May auction of 30-year Treasuries was the first since 2007 to result in an interest rate of at least 5%, with unremarkable investor demand even at that level. Barclays and Citigroup strategists have warned that yields may breach 5.5%, levels last seen in 2004. A Bank of America survey published on May 19 showed 62% of global fund managers expect yields to reach 6%, which would equal the highest level since late 1999.
UK Gilts: Highest Since 1998
Britain’s bond market has been among the hardest hit. UK 30-year gilt yields rose to 5.77%, their highest since 1998, with Britain overtaking Australia as the highest-yielding developed bond market at that tenor. The 10-year gilt yield reached its highest since July 2008.
The UK’s heavy reliance on imported energy has amplified its vulnerability to the oil shock. Markets now price in four quarter-point Bank of England rate hikes this year — a stark reversal from pre-conflict expectations of two cuts. The spike in borrowing costs has strained the government’s fiscal targets, with Prime Minister Keir Starmer calling an emergency meeting with BoE Governor Andrew Bailey in March to address the crisis. The Euronews reported that domestic political uncertainty, including fallout ahead of local elections, further weighed on gilt sentiment.
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Japan Breaks Records
Japan’s 30-year bond yield reached an all-time high, the highest since the data series began in 1999. The 10-year Japanese government bond yield surged to its highest level since May 1997. Fiscal expansion concerns and expectations of further Bank of Japan rate hikes have combined with global inflation pressures to drive the selloff. Germany’s 10-year bund yield also hit its highest since May 2011.
Fiscal Pressures Compound the Pain
The selloff is not being driven by inflation alone. In the US, the median budget deficit estimate of primary dealers shows a $1.95 trillion gap for the fiscal year ending September 2026, widening to $2 trillion in 2027. “Yields are not just pricing inflation volatility, but increasingly the return of fiscal risk,” said Laura Cooper, global investment strategist at Nuveen.
Across major economies, heavier issuance and larger term premiums are forcing investors to ask whether governments will keep borrowing aggressively into an inflationary environment — and what compensation they should demand. That combination is especially damaging for longer-duration bonds.
The Bond Rally Has Unravelled
For investors who began 2026 expecting the global easing cycle to continue, the reversal has been severe. The global index of bonds maturing in a decade or longer was up roughly 3% for the year at the end of February. It has since swung to a loss of 4.6%.
Technical factors are amplifying the move. Systematic and algorithmic selling strategies tend to accelerate once yields break through closely watched levels, creating a self-reinforcing dynamic. CNN reported that the selloff is raising borrowing costs across the economy, threatening to push mortgage rates higher, slow business lending, and pressure equity valuations.
What Would Reverse the Trend
A sustained reversal would likely require one of two developments: a credible de-escalation in the Middle East that durably lowers oil prices, or a meaningful deterioration in growth expectations that makes the inflation scare look overdone. Neither condition is currently in place. Until the mix of elevated energy costs, persistent inflation, fiscal deterioration, and resilient growth begins to shift, long-dated government bonds are likely to remain under pressure worldwide.
Sources: Bloomberg / Yahoo Finance / CNBC / CNN Business / UPI / Euronews / Trading Economics / IBTimes / Tradeweb / MarketScreener
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