Global Bond Tantrum: A Wrenching and Worrisome Start to 2025

US Yield Surge Increasing Borrowing Costs With Consequences for Economies, Assets

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For those unsettled by the relentless rise in government bond yields in the US and across much of the world lately, the message from markets is getting clearer by the day: Get used to it.

The world's biggest bond market and global bellwether is leading a reset higher in borrowing costs, with the prospect of a prolonged period of elevated rates carrying consequences for economies and assets everywhere.

Just days into 2025, yields on US government debt are surging as the risks to supposedly super-safe assets mount.

The economy continues to power ahead - Jan 10's blowout employment report provided the latest evidence - while the Federal Reserve is rethinking the timing of further interest rate cuts, and Donald Trump is returning to the White House with policies prioritizing growth over debt and price fears as borrowing has soared.

The rate on 10-year notes alone has soared more than a percentage point in four months and now is within sight of the 5 per cent barrier last breached briefly in 2023 and otherwise not seen since before the global financial crisis nearly two decades ago.

Longer-dated US bonds have already touched that milestone, with 5 per cent seen by many on Wall Street as the new normal for the price of money. Similar spikes are playing out internationally, with investors increasingly wary of debt from Britain to Japan.

"There is a tantrum-esque type of environment here and it is global," said Mr Gregory Peters, who helps oversee about US$800 billion (S$1.1 trillion) as co-chief investment officer at PGIM Fixed Income.

For some, the shift upwards in yields is part of a natural realignment after years of a near-zero rate environment following the emergency measures taken after the 2008 financial crisis and then the Covid-19 pandemic. But others see new and worrisome dynamics that present major challenges.