Sovereign Debt Concerns Linger as Global Bond Rout Loses Steam

September is a wake-up call for high-schoolers, as summer days at the park make way for integral calculus. It’s even more jarring for bond traders, whose number-crunching around the autumnal equinox is more stressful than the fall semester’s first 12th-grade exam.

That’s because the ninth month of the year is the worst month for longer-dated bonds: In the last decade, global government bonds with maturities over 10 years suffered a median loss of 2% in September, according to data compiled by Bloomberg. Unique in 2025 is that markets attempted a speed run, with a global rout in sovereign debt hitting this week before the NFL even kicked off its first regular season game. That’s in part because there are bigger concerns at play.

It’s the Economy, Stupid

On Wednesday morning, the 30-year US Treasury yield briefly topped 5%, long seen as a key psychological threshold, for the first time since July. While a federal appeals court ruling that most of President Donald Trump’s tariffs on foreign countries are illegal added uncertainty around future government revenue, analysts at ING said it’s simpler than that. (Trump said his administration will appeal.)

In a note Tuesday, they “firmly” declared this week’s bond selloff “had very little to do with tariff ‘uncertainty’” and was driven by a “mix of fiscal concerns.” The mix can be neatly summed up as fears that governments are borrowing too much plus stubborn, higher inflation. These factors render long-term bonds riskier, making it more expensive for governments to borrow. Hence, the yield on 30-year U.K. bonds hitting the highest level since 1998 on Tuesday, with all eyes on whether a forthcoming budget can plug a multibillion-pound hole in public finances. Hence, the yield on French 30-year bonds holding at its highest since 2008 on Wednesday, with Prime Minister François Bayrou’s government on the verge of collapsing over his plans to slash soaring deficits. Japan’s 30-year bond surged to a record high on Wednesday, and 30-year German Bunds joined the selloff with a 14-year-high yield. The reasons to care are simple:

• Higher, longer-term yields put upward pressure on mortgages, car loans, credit card rates and other debt, tightening a vice grip on households and businesses, with the stress rippling out to the broader economy.
• The risk of further bond market swings was on display in Britain on Tuesday, when the government sold a record £14 billion ($18.8 billion) of 10-year gilts with a 4.88% yield, the highest since 2008. As governments borrow more, they risk doing so at higher interest rates unless they convince markets they have their fiscal house in order.

Cooler Heads: The good news is that at least part of the selloff appears to have stabilized: The 30-year US Treasury yield ended Wednesday seven basis points lower at 4.898%, thanks to soft July jobs numbers boosting expectations of an imminent interest rate cut. Britain’s 30-year gilt yields also fell eight basis points. Meanwhile, the CBOE Volatility Index, better known as Wall Street’s fear gauge, fell on Wednesday after spiking amid the bond selloff. Now, just the simple task of reining in all those budgets.