Global bond markets face rising yields amid sovereign debt concerns

Global bond markets are experiencing a period of volatility as investors express growing skepticism regarding the sustainability of high levels of sovereign debt. This “bond panic” has led to rising interest rates for major economies, including the United States, France, Great Britain, Germany, and Japan.

In response to these trends, the Norwegian sovereign wealth fund, which manages approximately $2.3 trillion, has proposed reducing its holdings of US and Eurozone government bonds in favor of corporate bonds. The US federal debt has recently surpassed $40 trillion, representing roughly 125 percent of its GDP.

As investors demand higher yields to compensate for perceived risks, the impact is spreading to broader economies. For instance, 10-year US Treasury yields have reached their highest levels since mid-2023, and 30-year mortgage rates in the US have climbed toward 6.7 percent per year.