Why Bond Yields Are Climbing All Over the World

So, the bond market is having a really bad week. We haven't seen this kind of price action in many, many years. What is happening here is that bond prices are falling really rapidly. Yields are going high. That's the bit that everybody focuses on. And we haven't seen the kind of numbers that we're seeing this week for a very long time. The UK 30-year bond has gone through 6%. We haven't seen that since 1998. Over in France, the OAT bond spread, that's widened out to 130 basis points, 1.3%. The US 10-year, the global benchmark, is at 5.3%. These are very, very big numbers. So, why is this all happening? Well, there's a lot of factors. One of them is simply that oil and gas prices are sharply higher because of the Iran war. But then we've also got politics in the mix as well, both in the UK and in France. Can either country get their fiscal house in order? And then there's the composition of the market as well. The bond market is increasingly controlled by hedge funds. With the market moving this quickly, some managers are going to be forced out. Risk managers as well, maybe saying, "Guys, let's just calm things down a little bit." So, there's a few good reasons, but there's one big one. The US economy is stronger, hotter than we thought it was. You've got the AI trade. You've got some really strong government spending. You've got a consumer that looks pretty good as well. All of these factors mean that maybe the Federal Reserve, the central bank of the United States, is going to have to raise rates much more quickly and higher than the market had originally anticipated. And that could be [music] the big reason why we're seeing this action in the bond market.