The Long End Is Breaking Higher — Everywhere at Once

September 10, 2026

Global bond markets have been rattled not only by the large issuance of artificial intelligence (AI)-related debt, but also by volatility in the sovereign market. Four of the world's largest government borrowers saw long-end yields hit multi-decade highs within weeks of one another.

The U.S. 10-year Treasury is nearly 4.8%.¹ UK 10-year gilts are around 5.23%, their highest level since the depths of the 2008 global financial crisis.² French 10-year government bonds (OATs) have pushed above 4%, the highest levels since 2008.³ Japanese 10-year bonds have crossed 3% for the first time since 1996 — a historic move for a market that spent a generation anchored near zero.⁴

None of these moves is isolated. Governments are issuing more debt than markets want to absorb at prevailing prices, inflation refuses to fully settle and AI capital expenditure (capex) has emerged as a new competitor for capital. Sovereign borrowing hit a record in 2025 and is on pace to rise again even as demand for long-duration debt weakens,⁵ and this year's conflict in the Middle East has investors pricing in stickier inflation than they expected a few months ago. Still, each country is facing challenges of its own.

In the U.S., the selloff is not primarily a growth scare — the economy has proven more resilient than expected, and AI-driven capex is keeping growth expectations elevated. The complicating factor is the Federal Reserve (Fed): uncertainty around Chair Kevin Warsh’s inflation messaging has pressured the long end specifically, and total U.S. debt has just crossed $40 trillion.⁶ The Treasury has responded by doubling its long-bond buyback program to support liquidity in the 30-year sector,⁷ where yields have pushed above 5.3%, the highest since 2007,⁸ though its effect was short-lived.

Gilts are the starkest example of a market testing a government's fiscal promises in real time. The UK has bound itself to two rules: a pledge that the national debt will fall as a share of gross domestic product (GDP) by 2029/30, and a commitment to keep day-to-day government spending in balance rather than financed through borrowing. Unlike the U.S. story, this is less about a booming economy and more about doubt that the rules will be met. The 30-year gilt, near 5.80%, has not been this high since 1998.⁹ Chancellor of the Exchequer John Healey is due to present the government’s budget to Parliament in late October,¹⁰ when markets will see whether those promises will be kept.

France looks less like a rates story and more like a political one. Debt-to-GDP has climbed to roughly 118%, the deficit sits near 5% and both S&P and Fitch have downgraded French debt within the past 13 months.^11,12 Notably, the spread between French and German 10-year yields has widened from roughly 71 basis points (bps) at the start of the year to around 87 bps currently.¹³ The National Assembly remains deadlocked over the national budget as a fragmented government struggles to produce a cohesive plan to pare back spending. With another contentious budget cycle ahead of the 2027 presidential election, France illustrates how fiscal pressures can become amplified when accompanied by political uncertainty.

Japan's move is the most structurally significant, even though its absolute yield level is the lowest of the four. A 10-year Japanese government bond (JGB) yield above 3% would have been unthinkable for most of the past three decades. The drivers are the Bank of Japan's gradual policy normalization, firming inflation and a public debt load north of 200% of GDP.¹⁴ The development carries global implications: as domestic yields rise, they are pulling Japanese investors — historically among the largest buyers of U.S. Treasuries — back home, creating a direct channel through which Japan's story feeds into the U.S. one.

Key Takeaway

Fiscal austerity and inflation controls will be key themes to watch. The governments that move credibly on both are the ones likely to see their borrowing costs come down.

 

Sources:

^1-4,8,9,13Bloomberg

⁵OECD – Sovereign borrowing outlook: Global Debt Report 2026; 3/4/26

⁶The Wall Street Journal – U.S. National Debt Just Passed $40 Trillion: How We Got Here and Why; 8/19/26

⁷U.S. Department of the Treasury – Treasury Announces Increased Sizes of Nominal Long-End Liquidity Support Buybacks Beginning September 9; 8/19/26

¹⁰The Wall Street Journal – UK Pays Multi-Decade High Yields at Long-Term Debt Sale; 9/8/26

¹¹European Commission – Economic forecast for France; 5/21/26

¹²The Economy – France Hit by Triple Credit Downgrade, Default Risk Looms Amid Fiscal Paralysis; 10/21/25

¹⁴The Wall Street Journal – Think Treasurys Are Having a Rough Summer? It’s Even Uglier Abroad; 8/27/26

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