The bond rout has gone global, with Japan's 10-year yield climbing above 3.1% to its highest level since 1996, UK gilts at 5.36%, their highest since 2007, and French OATs near 4.68%, their highest since 2008. The 10-year Treasury surpassed 5.2% for the first time since 2007. The repricing marks a reversal from the ultra-low-yield era when rates went negative in Japan and Europe, and is being driven by persistent inflation concerns, heavy government borrowing and rising debt issuance, with higher oil prices adding pressure to inflation expectations and massive AI-related borrowing increasing competition for capital.

Emerging-market investors are dialing back their riskiest bond bets as the deepening selloff in global credit markets threatens to derail a stellar run for developing-world debt. Markets put the odds of an October Fed hike at about 64%, a level some strategists argue is still underpriced because with no Fed meeting in November, a slow-to-act central bank risks falling behind. Bianco Research says the market is demanding a rate hike on October 28, a week before the midterm elections, and warns that long-term yields could spike further if the Fed sits idle.

The US leg of the selloff gathered force after a $70 billion five-year note auction cleared at 5.033%, a 3.1 basis point tail that was the second biggest on record, and the 10-year yield posted its largest one-day jump since April 2025. Long-term yields rose through the Fed's 2024 to 2026 cutting cycle for the first time in more than 50 years, a message Bianco Research says the market was sending that policy was too easy. Just nine months ago, markets expected the Fed to be on its third rate cut of 2026 by now.