Introduction: Asia-Pacific markets slide after global bond sell-off
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s no let-up in the market turmoil which gripped investors yesterday, as government borrowing costs around the world hit their highest level in years.
Shares are sliding in Asia-Pacific markets today, as renewed clashes between the US and Iran drive up the oil price.
In Toyko, the Nikkei 225 share index has slumped by 2.7% today. China’s markets are in the red too, with the CSI 300 losing 1.4%, while South Korea’s KOSPI has dropped by 3.3%.
Last night, Wall Street ended lower too – with the Russell 2000 index of smaller US companies dropping by 1.2%.
This follows a day of bond market turmoil on Tuesday, which saw the UK’s long-term borrowing costs jumped to their highest level since early 1998, while Japan’s 10-year bond yield hit its highest level since 1996.
Sovereign bond yields appear to be being pushed up by three factors – worries about rising inflation, concerns about government spending levels, and competition with AI companies who are also borrowing heavily.
As Jim Reid, market strategist at Deutsche Bank, puts it:
As meteorological autumn begun yesterday, a chill swept through markets as rising geopolitical risk, oil prices and bond yields created a risk off start to September.
Rising bond yields push up a government’s borrowing costs – and risk eating into the new UK chancellor’s fiscal headroom, making it harder to afford new spending pledges in the upcoming budget.
Last night, Lord Jim O’Neill warned that UK mortgage rates are “going up” unless the bond markets cool.
Lord O’Neill told LBC’s Andrew Marr it had been a “tough day”, explaining:
10-year gilt yields or 10-year interest rates have risen by a quarter of a percent, which in one day is a lot. We’ve not had that since Liz Truss days…
Lord O’Neill , who has turned down a role in Andy Burnham’s government, expained that investors want to see signs that the UK has a “sensible fiscal strategy”, adding:
When I woke up this morning I thought ‘uh oh this is going to be tough’. I didn’t think it’d be quite this tough but it’s been a tough day.’
The agenda
Key events
IMF chief: increase in global interest rates is of particular concern
The head of the IMF has warned that the rise in bond yields among advanced economies threatens to cause economic pain for developing nations.
Kristalina Georgieva, managing director of the IMF, told the gathering of G20 finance ministers and central bank governors in North Carolina that the rise in global borrowing costs was a “particular concern”.
She said:
The sovereign debt landscape for emerging and low-income countries has gradually improved in recent years, thanks to domestic policy efforts and international cooperation. But progress has been uneven, and persistent risks and uncertainty in the global economy, including spillovers from the significant increase in yields in advanced economies, call for policy discipline and underscore the importance of building buffers.
The increase in global interest rates is of particular concern. As key advanced economy yields rise to multi-year highs, they lift most of the world’s yield curves up with them. In some emerging markets this more than fully offsets hard-won spread compression.
High refinancing needs and rising debt-service costs are constraining many developing economies, in particular low‑income countries, limiting their capacity to finance critical spending on infrastructure, health, and education, which undermines growth and, in turn, debt sustainability.
These challenges are compounded by a sharp decline in net external financing, including cuts in official development assistance, and a marked reduction in new inflows from non‑Paris Club creditors.
European stock markets are set to open lower, when trading begins in 40 minutes time.
Reuters reports that Eurostoxx 50 futures are down 0.36%, while Germany’s DAX index is on track for a 0.46% fall.
For the UK, FTSE futures are down 0.37%
Brent crude oil price hits $97
Oil has hit its highest level in almost six weeks today, after the US and Iran exchanged airstrikes.
Brent crude traded as high as $97 a barrel, for the first time since 24 July, having jumped by 4.6% yesterday.
That risks adding to the inflationary pressures that have been pushing bond yields higher.
ING analysts told clients:
“Developments in recent days brought risks to regional oil supplies back into focus … We’ve seen oil flow through the Strait of Hormuz despite the stalemate between the US and Iran, but rising tensions clearly put crossings at risk.”
Australia’s borrowing costs hit 15-year high
Australia’s 10-year government bond have risen to their highest level in over 15 years, Reuters reports.
The yield (or interest rate) on 10-year Australian debt has hit 5.22% today, amid the global sell-off in government debt.
India’s 10-year bond yield tops 7% amid debt sell-off
The bond sell-off has hit India today.
The yield on Indian 10-year government bonds briefly hit 7% on Wednesday, for the first time in three months, Reuters reports
Introduction: Asia-Pacific markets slide after global bond sell-off
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s no let-up in the market turmoil which gripped investors yesterday, as government borrowing costs around the world hit their highest level in years.
Shares are sliding in Asia-Pacific markets today, as renewed clashes between the US and Iran drive up the oil price.
In Toyko, the Nikkei 225 share index has slumped by 2.7% today. China’s markets are in the red too, with the CSI 300 losing 1.4%, while South Korea’s KOSPI has dropped by 3.3%.
Last night, Wall Street ended lower too – with the Russell 2000 index of smaller US companies dropping by 1.2%.
This follows a day of bond market turmoil on Tuesday, which saw the UK’s long-term borrowing costs jumped to their highest level since early 1998, while Japan’s 10-year bond yield hit its highest level since 1996.
Sovereign bond yields appear to be being pushed up by three factors – worries about rising inflation, concerns about government spending levels, and competition with AI companies who are also borrowing heavily.
As Jim Reid, market strategist at Deutsche Bank, puts it:
As meteorological autumn begun yesterday, a chill swept through markets as rising geopolitical risk, oil prices and bond yields created a risk off start to September.
Rising bond yields push up a government’s borrowing costs – and risk eating into the new UK chancellor’s fiscal headroom, making it harder to afford new spending pledges in the upcoming budget.
Last night, Lord Jim O’Neill warned that UK mortgage rates are “going up” unless the bond markets cool.
Lord O’Neill told LBC’s Andrew Marr it had been a “tough day”, explaining:
10-year gilt yields or 10-year interest rates have risen by a quarter of a percent, which in one day is a lot. We’ve not had that since Liz Truss days…
Lord O’Neill , who has turned down a role in Andy Burnham’s government, expained that investors want to see signs that the UK has a “sensible fiscal strategy”, adding:
When I woke up this morning I thought ‘uh oh this is going to be tough’. I didn’t think it’d be quite this tough but it’s been a tough day.’
The agenda
Source: https://www.theguardian.com/business/live/2026/sep/02/bond-market-sell-off-shares-slide-oil-inflation-fears-latest-news-updates
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