Government borrowing costs hit multidecade highs

NEW YORK

Government borrowing costs across major economies climbed to multi-decade highs on Aug. 18 as elevated oil prices fueled inflation concerns and investors grew wary of rising public debt and heavy bond issuance.

The yield on 30-year U.S. Treasury bonds rose above 5.33 percent, its highest level since June 2007, before easing. The benchmark 10-year yield traded above 4.7 percent.

The selloff extended across Europe and Asia. Japan’s 10-year government bond yield reached 2.945 percent, its highest in three decades, while the equivalent British yield climbed as high as 5.176 percent.

Germany’s 10-year yield reached its highest level since 2011 and France’s hit a 16-year peak.

Oil trading above $91 a barrel added to fears that energy costs would keep inflation elevated and limit central banks’ room to lower interest rates.

Annual U.S. consumer inflation eased to 3.4 percent in July but remained above the Federal Reserve’s 2 percent target. The Fed left its benchmark rate unchanged at between 3.5 and 3.75 percent on July 29.

Analysts said the rise in long-term yields also reflected concerns over government borrowing and demands for greater compensation for holding debt over longer periods.

U.S. federal debt is nearing $40 trillion, while large bond offerings by technology companies financing artificial intelligence projects are adding competition for investor funds.

Higher bond yields increase governments’ refinancing costs and can feed through to mortgages, business loans and other forms of credit.