It's not just Treasuries: Japan and Germany are repricing borrowing costs too

Most of the attention this week has been on the U.S. 10-year Treasury yield breaking to its highest level since 2007. But Thursday made clear that the move is part of something larger. Government bond yields rose across the world's biggest markets at the same time, and when that happens the pressure on stock valuations is harder to escape.

Japan: a 30-year high after a rate hike

The most dramatic move came in Tokyo. The yield on Japan's 10-year government bond jumped about 10 basis points to roughly 3.08%, its highest level since August 1996. The five-year yield rose to a record, and yields climbed across the curve.

Thursday was the first trading day in Japan after the Bank of Japan raised its policy rate to 1.25% from 1% last Friday, taking it to a 31-year high. Japanese markets had been closed for holidays through Wednesday, so traders were catching up on both the central bank's move and the Treasury selloff that had happened in the meantime.

Germany: the Bund at a 17-year high

In Europe, the German 10-year Bund yield rose to about 3.62% at its peak, its highest in 17 years. British gilt yields rose as well. Reuters also noted that the gap between French and German borrowing costs had widened to its largest since 2012, a reminder that bond investors are becoming more selective about which governments they lend to.

The U.S. at the center

Treasuries remain the anchor for global finance. The 10-year yield touched roughly 5.22% on Thursday, its highest since 2007, and the 30-year bond reached about 5.50%, a level not seen since 2004. The move built on Wednesday's selloff, which delivered the 10-year's biggest one-day jump since April 2025.

Why they are moving together

Oil is the common thread. Front-month Brent crude settled at $106.60 a barrel on Thursday, up 3.4%, as uncertainty about shipping through the Strait of Hormuz dragged on. Higher energy costs feed into inflation expectations everywhere at once, and bond investors respond by demanding more yield to compensate.

Central banks are adding to it. The Federal Reserve raised rates last week, and officials including New York Fed President John Williams have said another increase this year would be reasonable. The Bank of Japan has just tightened as well. When several major central banks lean in the same direction, there is less room for money to flow from one bond market to another in search of a better deal, so yields tend to rise in tandem.

Supply is a third factor. Governments in the U.S., Europe and Japan are all funding large deficits, and in the U.S. the Treasury must refinance a big stock of existing debt while issuing more. More bonds for sale, at a time when buyers are already nervous about inflation, generally means higher yields to clear the market.

A synchronized selloff removes the usual safety valve: investors cannot simply rotate from one country's bonds to another's to escape the move.

What it means for stocks

For equity investors, the key point is that the discount rate used to value future profits is rising almost everywhere. That tends to weigh hardest on companies whose earnings sit far in the future, such as early-stage technology, and on businesses that rely on borrowing, such as homebuilders, utilities and small caps. On Thursday, market wraps pointed to exactly those groups, including housing, solar and smaller companies, as the laggards.

It also affects currencies. Higher Japanese yields can make it more attractive for Japanese investors to keep money at home rather than buy foreign assets, a shift that matters because Japan is one of the largest foreign holders of U.S. Treasuries.

What to watch

• Whether the Japanese 10-year can hold above 3%, and any comments from the Bank of Japan about the pace of future increases.
• Friday's U.S. durable goods and consumer-sentiment reports, including inflation expectations.
• Crude oil and any developments in U.S.-Iran talks over the Strait of Hormuz.
• European inflation data and ECB commentary in the coming week.

Bond markets can reverse as quickly as they sell off, and nothing here predicts where yields go next. But as of Thursday, the rise in borrowing costs was a global story, not just an American one.