G7 government bond yields rise toward pre-2008 crisis levels

Government bond yields in G7 nations are rising toward levels not seen since before the 2008 global financial crisis, causing significant price declines for these traditionally safe assets. For example, an Austrian government bond maturing in 2071 has lost approximately 68% of its value over the last five years.

This trend is driven by a combination of prolonged fiscal irresponsibility, pro-inflationary supply shocks, and an investment boom related to artificial intelligence. The United States and Japan are identified as the epicenters of this shift, with the volatility spreading to Europe, specifically affecting French and Italian debt.

In the United States, the situation is complicated by a lack of political will for fiscal restraint and the necessity of financing military operations in the Persian Gulf. Additionally, the relatively low average maturity of U.S. government debt—less than six years—means that rising yields translate rapidly into higher interest costs for the government.