Something unusual is going on with bonds, the financial instruments governments issue to raise revenue: Bond yields—the amount of interest governments pay out on their bonds—have been steadily rising around the world since last September. Particularly in the U.S., U.K., Germany, and Japan.

In February, yields for Japanese bonds hit their highest rate since 2011. Yields for 10-year U.K. bonds were the highest they’d been since 2008; yields on their 30-year bonds were the highest since 1998. The British weekly The Economist said the global climb in bond yields “marks a profound shift from before and during the Covid-19 pandemic, when yields were heading to all-time lows.”

Adding to the mystery of this whole phenomenon is the fact that the U.S. Federal Reserve had been aggressively cutting interest rates since September, even if they’ve held firm in early 2025. The Fed’s interest rate is the benchmark rate for bank lending, and Fed rates and bond yields typically move in tandem, not away from one another. In the Financial Times, one columnist called this divergence “quite weird.”

Bond yields aren’t abstract financial statistics, either; they influence the costs of major purchases. They determine the interest rates for home mortgages and car loans. And rising bond yields have historically been followed by higher inflation, which would raise the prices of most goods and services. So what’s going on?

Rebecca Patterson is a senior fellow at the U.S. Council on Foreign Relations and an independent director at Vanguard, a global asset manager; she was previously chief investment strategist for Bridgewater Associates, the world’s largest hedge fund. Patterson says a number of factors are at work here. Investors were expecting higher growth, but lately, they’ve begun to fear higher inflation—and meanwhile, the supply of bonds keeps growing, forcing governments to offer higher yields to get investors to buy them.

That growing supply of government bonds in the world, Patterson says, is revealing a critical weakness in many countries’ financial health—and a potentially serious problem for the future of their public services. Countries are issuing more and more bonds because their governments keep running budget deficits—financed through the bonds—and their total public debts keep growing. But when governments have to spend more money every year paying off the interest on bonds, they have less to spend on public goods like health care, education, or defense, unless they just keep piling on more debt—which is, it turns out, the path most advanced countries are currently on …

Michael Bluhm: Why are bond yields rising in so many countries all at once?

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