As long-term interest rates on Government Bonds rise around the world, anxiety in the market is also increasing. Park Sang-hyun, an analyst at iM Securities, forecasted that this week will be a turning point for short-term trends.
As of the 1st, the 10-year Government Bonds yield in France and the United Kingdom rose to 4.5% and 5.69%, respectively. The U.S. 30-year Government Bonds also approached the 5% mark.
The increase in issuance volume from major European countries is cited as the primary reason. The United Kingdom issued £14 billion in 10-year Government Bonds, and Italy issued a total of €18 billion in 7-year and 30-year Government Bonds, marking an unprecedented amount in the European bond market. Additionally, political instability in France has added pressure to long-term Government Bonds yields, according to Park.
In the United States, tariffs are a concern. A court ruling deemed President Donald Trump's tariff policy illegal, and the large-scale tax cut law (OBBBA) was passed based on tariff revenues, raising fears of renewed fiscal crises.
Park noted, "Although the details vary by country, factors that provoke fiscal risks have come to the forefront, leading to continued anxiety centered on long-term Government Bonds yields."
Park predicted that the global Government Bonds market would determine short-term trends based on the court ruling regarding the dismissal of U.S. Federal Reserve Governor Lisa Cook, as well as the potential resignation of cabinets in France and Japan.
Park assessed that the possibility of long-term Government Bonds yields inflicting severe damage to the financial market and the economy is low. However, he advised that the phenomenon of rising long-term Government Bonds yields despite the Central Bank's interest rate cuts should be closely monitored.
He said, "The fact that monetary policy does not significantly affect long-term Government Bonds yields is largely due to the considerable fiscal risks in each country. If long-term interest rates continue to rise even after the resumption of interest rate cuts by the U.S. Federal Reserve, it could signal a spreading unease in the financial market."