The markets are proving to be none too happy about it. like governments all over the world they are organizing their finances and they demonstrate it by putting for sale what is the lifeblood of the wholepublic gear, government bonds. But, as seen in the years of major financial crises, from Lehman Brothers to Greece, almost twenty years ago, the movement it backfires on the governments themselves because investors demand higher returns to buy government bonds that they consider less reliable, consequently raising the voice of the cost of debt, further complicating matters. Governments are all struggling with the common evil of the increase in energy costs due to the rise in oil prices under the blows of the war in the Middle East, which central banks are trying to curb by raising interest rates, while political upheavals loom on the horizon with the start of elections, starting with the US Midterm elections next month and ending with the European elections scheduled for 2027.
“I wouldn't call it a crisis yet, but it looks like it has the potential to become one,” he told Reuters George Lagarias, chief economist at Forvis Mazars, said: "If this situation drags on for another couple of weeks, then we'll be talking about a bond market crisis."
The rise in government bond yields has an impact on interest rates funding, which companies need and that's why Even stock markets are penalized.
France: 10-year OATs hit their highest level since 2002, with OAT/Bund spread at 150 basis points. Lecornu's move is unsatisfactory.
In Europe, what is most surprising is the extent to which investors have not approved the long-awaited French budget: after the details indicated by the Prime Minister Sebastien Lecornu French government bonds were further sold off, widening the gap with their German counterparts (still considered benchmarks) this morning to almost 150 basis points, the widest level since the 2012 Eurozone debt crisis, with the yield on the 10-year OAT in the 5% area, the highest level since 2002. The French government has a plan presented To drastically reduce the budget deficit, outlining the details of a €54 billion intervention. Approximately 60% of the budget effort would be allocated to spending, with cuts to be made in highly sensitive spending items such as pensions, public sector salaries, and state-funded sick leave. The budget bill must be approved by the end of December to avoid the need for emergency legislation.
'SItaly, With the Council of Ministers expected to announce the budget deviation on Friday evening and indicate the new budgets for 2027 and 2028, investors are demanding a yield of 4,70% on the 10-year BTP, the highest since October 2023, with a spread of 123 basis points. According to rumors, the total budgets should amount to €28 billion: €14 billion in 2027 and €14 billion in 2028 (€7 billion for energy and €7 billion for defense, in each of the two years). Italy will confirm its commitment to reduce the deficit by 2026 below the maximum ceiling set by the EU and, again according to expectations, will publish the new economic forecasts multi-year, reviewing growth estimates for this year are on the rise bringing it to around 1% from the 0,6% expected in April.
And in Germany, Spain, Greece and the United Kingdom?
Same Germany moreover, with the Merz government under pressure after the elections of the individual Länder which highlighted unfriendly parties and an economy burdened by an industry in serious difficulty, the yield on the ten-year bond is showing 3,45%, never seen since April 2011. In Europe, the Spain, whose investors appreciate the good economic growth, which manages to keep the yield on 10-year bonds at 4,09% with a distance from the German bund limited to 65 basis points. But also the Greece, now recovered from the crisis of almost twenty years ago and promoted by the rating agencies, has a 10-year bond yield of 4,50%, less than 100 basis points above Germany and 20 basis points better than Italy: its public debt is expected to fall below that of Italy. In UK Thirty-year borrowing costs hit 6% for the first time since 1998. Government bond yields also from Japan in the long term they have reached multi-decade highs.
US employment data expected today: details on wage expenditures
What about US government bonds? The yield on the benchmark 10-year Treasury note rose to 5,34% yesterday, its highest level since 2002, ahead of today's labor market report, which could change market sentiment. Forecasts are focused on a 90.000 nonfarm payroll gain in September, while the unemployment rate is expected to remain stable at 4,1%. A strong reading could revive bets on a second round of unemployment. rate hike by the Federal Reserve this month, currently listed at only 25%. But attention is also on the indications on the wages, because a surge in them could increase the possibility of monetary tightening, which would have a negative impact on the markets.
What are the assets to take refuge in? Gold has lost its scepter.
So what are the asset investors can find refuge at this moment? The great classics are coming back into fashion Swiss franc al dollar, but ultimately, looking for the least bad, even US government bonds themselves improved last night. The US dollar index, which measures the currency against six other currencies including the euro and the Swiss franc, stands at 101,89 after reaching its highest level since April 2025 and is on track to close its third consecutive week of gains, with an increase of 0,9%. On the contrary, theeuro loses ground at $1,248, reaching its lowest level since May 2025. Instead, what has been the safe haven par excellence, They, It lost its scepter precisely because of the high value of the dollar and this morning it is quoted at 4.181,59 dollars an ounce with a loss of over 2% since the beginning of the week.
in bags, penalized by the fact that companies will find themselves with financing rates magnified by the increase in yields, investors continue to believe in the artificial intelligence sector which continues to rise among the stock markets. Even yesterday, in one of the worst bond storms, the technology sector shone, thanks to Micron Technology, which closed up 3% on the back of better-than-expected revenue forecasts, while Anthropic, unfazed by the tensions, aims to go public as early as mid-November with stellar valuations.
