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Global bond sell-off on inflation fears
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The gist
Global bond yields hit multi-year highs as investors fear inflation. Rising oil prices and Fed rate hike bets drive the sell-off.
Background
A global bond sell-off is underway as investors worry that rising energy prices, especially oil, will fuel inflation and force central banks to raise interest rates. Renewed US-Iran clashes have pushed oil prices higher, adding to these concerns. At the same time, governments are borrowing heavily, increasing supply of bonds and pushing yields up.
How it unfolded
- Aug 28, 2026Federal Reserve Chair Kevin Warsh at Jackson Hole says inflation is 'concerning', signaling possible rate hikes.
- Sep 1, 2026Global bond sell-off deepens: UK 30-year yields hit highest since 1998, Japan 10-year at 30-year high, US 10-year at highest since January 2025. Oil prices surge on US-Iran strikes.
- Sep 2, 2026Asia-Pacific markets slide: Nikkei down 2.7%, KOSPI down 3.3%. Brent crude hits $97 a barrel.
Who’s saying what
- Analysts
- Rising oil prices and inflation fears are negative for bonds, and central banks may need to hike rates.
- Bulls
- Treasury Secretary Bessent says productivity growth will neutralize inflation and high oil prices are temporary.
- Bears
- Investors are dumping bonds as they reassess rate hike odds, with futures pricing a 60.4% chance of a hike in September.
- Caution
- Some strategists argue there is no empirical basis for a rate hike, saying Warsh is 'talking up inflation'.
Still unverified
Some analysts question the Fed's hawkish stance, suggesting there is no empirical basis for a rate hike.