Why Government Bonds Are Being Sold Globally: Considering the 'Tectonic Shift in Interest Rates' in the US, Japan, France, and the UK

Hello, this is seiichirou.

When it comes to asset management, people tend to focus on ‘stocks’ and ‘investment trusts,’ but the biggest theme in global markets right now is the tectonic shift in ‘interest rates (government bond yields).’
In short, the situation is that ‘government bonds, which should be safe, are being sold off, and interest rates are rising to levels not seen in decades’ all over the world.

In this article, I will organize the movements in the United States, Japan, France, and the UK, delve into ‘why this is happening simultaneously around the world,’ and consider how individual investors should perceive this ‘era of high interest rates.’
The figures are as of around October 9, 2026.

■ What is happening right now

・United States: 10-year bond yields temporarily rose to the 5.36% range on October 7 (the highest since April 2002, about 24 and a half years ago). It was 5.24% on October 9. The 30-year bond is in the 5.6–5.7% range.

・Japan: 10-year bond yields temporarily reached 3.115% on September 25, the highest level in about 30 years since 1996. It was in the 3.01% range on October 9. The 30-year bond is in the 4% range.

・France: 10-year bond yields temporarily reached nearly 5% in early October (the highest since 2002, about 24 years ago). This level exceeds that of Italy.

・United Kingdom: 30-year bond yields temporarily exceeded 6% on October 1, the highest level since 1998. The 10-year bond also temporarily reached the 5.5% range (the highest in about 19 years).

・Germany: 10-year bond yields are around 3.5%, the highest level in about 15 years. However, it is at a lower level than France or the UK.

■ Why are interest rates rising globally at the same time: 3 common factors

1. Inflation concerns due to high crude oil prices
Crude oil prices remain high due to heightened tensions in the Middle East (conflict between the US and Iran).
Since energy prices push up overall price levels, the view that ‘central banks cannot cut interest rates and may instead need to raise them further’ is gaining strength, leading to the selling of government bonds.

2. Central bank tightening
The FRB decided on a rate hike for the first time in about three years on September 16, bringing the policy rate to 3.75–4.00%.
The Bank of Japan also raised rates from 1.00% to 1.25% on September 18 (the first time in three months, following June).
The Bank of England (BOE) kept rates on hold, but 3 out of 9 members argued for a rate hike, and speculation about additional hikes is smoldering.

3. Fiscal anxiety and massive issuance of government bonds
Markets are becoming sensitive to fiscal expansion and debt expansion in various countries. This is a movement (a rise in term premiums) where ‘higher interest rates are demanded for countries with increasing debt.’
The increase in corporate bond issuance accompanying funding for AI investment is also pointed out as a factor increasing the supply of bonds.

In other words, it is closer to reality to consider this the result of a combination of ‘inflation concerns + central bank tightening + fiscal anxiety,’ rather than just ‘fiscal issues.’

■ 1. United States: The ‘double burden’ of inflation and fiscal policy

The federal budget deficit for fiscal year 2026 (ending in late September) was approximately $1.993 trillion, the largest since 2021. It exceeded 6% of GDP.
Net interest payments exceeded $1.1 trillion for the first time, surpassing spending on national defense and Medicare (only social security benefits exceed this).

However, the main cause of the current rise in interest rates is price vigilance due to high crude oil prices, a firm economy, and speculation about additional FRB rate hikes. In fact, demand strength has been confirmed in government bond auctions, mainly from overseas investors, so it is not a situation where ‘there are no buyers.’
The phase has changed from an era where ‘US government bonds are safe’ to an ‘era where yields are attractive, but inflation and fiscal risks must be priced in.’

■ 2. Japan: The ‘world with interest rates’ has finally arrived

In October 2025, when the Takachi administration was inaugurated, long-term interest rates were in the 1.6% range.
In less than a year, they have exceeded 3%, effectively doubling.
The factors are the Bank of Japan’s rate hikes, global interest rate increases, and market vigilance toward the administration’s fiscal expansion policy.

The impact on households has already begun.
The best preferential interest rates for housing loans at the five major banks rose to an average of 1.389% for variable-rate loans and 4.104% for 10-year fixed-rate loans in October.
Furthermore, reflecting the Bank of Japan’s September rate hike, variable rates are expected to rise from December through the spring of 2027.

As for the yen, the yen continues to weaken even though the Bank of Japan has raised interest rates.
This is because the interest rate gap between Japan and the US is large, and US interest rates are also rising.
The Bank of Japan’s rate hike is one measure to curb the yen’s depreciation, but it is not determined by that alone.

■ 3. France: ‘Fiscal distrust’ born from political turmoil

France is currently the country that attracts the most market vigilance in Europe.
Debt is 119% of GDP, the highest since the war. The 2026 budget deficit is expected to be 5.4% of GDP, exceeding the 5.0% target.
The 2027 budget proposal announced on October 1 includes 54 billion euros in fiscal consolidation measures, aiming to keep the deficit at 5.0%. However, with the presidential election (April–May 2027) approaching, the confrontation between the ruling and opposition parties has deepened, and deliberations are seen as inevitably difficult.
Rating agency Scope Ratings downgraded France’s long-term rating to A+ on September 18. Moody’s has also pointed out strong uncertainty regarding the passage of the budget.
The yield spread between Germany and France temporarily widened to about 1.5% on October 2, a level not seen since the European debt crisis of 2011–2012. A ‘reversal’ has also occurred where French yields exceed those of Italy and Greece.

The 10-year bond of Germany, a safe asset in Europe, is also at its highest level in about 15 years, but the gap with France has widened to about 1.5%. This shows that ‘even in the same Europe, there is a large difference in confidence in fiscal policy.’
It is a lesson that ‘if politics is in disarray and debt cannot be reduced, even developed countries will be mercilessly penalized by the market with rising interest rates.’

■ 4. United Kingdom: Memories of the ‘Truss Shock’ and market vigilance toward the new administration

The UK is currently one of the countries with high long-term interest rates among the G7.
30-year bond yields temporarily exceeded 6% on October 1 and hit the 6.0% range again on October 7.
It is reported that this is the first time a G7 long-term bond has exceeded 6% since Italy in 2012.

The background is inflation concerns due to high crude oil prices and speculation about additional BOE rate hikes.
The BOE kept the policy rate at 3.75% on September 17, but the vote was 6 to 3, with 3 members arguing for a rate hike to 4.00%.

Another focus is politics and fiscal policy.
On July 20, Mr. Burnham took office as the successor to former Prime Minister Starmer. The market was wary from the beginning due to speculation that he would move toward expansionary fiscal policy. Mr. Healey, considered a practical person, took the post of Chancellor of the Exchequer and has emphasized ‘adherence to fiscal discipline.’
However, there are private estimates that the margin for fiscal rules (reported to be about 23 billion pounds at the time of taking office) is shrinking due to an increase in interest payments.
Chancellor Healey’s first budget is scheduled for October 28, and the focus is on ‘whether it is content that can maintain market confidence.’

In the UK, there was the ‘Truss Shock’ in 2022, where the government’s sudden fiscal easing policy caused a loss of market confidence, leading to a sharp drop in the pound and a surge in government bond yields.
With that memory, the market is sensitive to every move in fiscal management.

■ Organizing the differences among the 4 countries

・United States: Inflation and economic strength are the main causes. Buyers of government bonds are still active, and selling is mainly a reaction to ‘price and rate hike speculation.’

・Japan: The Bank of Japan’s rate hikes and vigilance toward fiscal expansion are the main causes. The absolute level of interest rates is lower than in other countries, but the pace of increase is fast.

・France: Political instability and budget uncertainty are the main causes. The color of country-specific fiscal problems is strong.

・United Kingdom: Confidence in the new administration’s fiscal management and inflation/rate hike speculation are the main causes. The budget announcement is a litmus test.

Even with the same ‘interest rate rise,’ the reasons differ by country. When watching the news, your understanding will deepen if you are conscious of ‘what is being sold in that country.’

■ How interest rates connect stocks, currencies, and bonds

1. Bonds
When interest rates rise, the price of bonds already held falls.
Since the longer the maturity, the greater the price decline, the premise that ‘bonds are safe’ is becoming less applicable to bonds with longer durations.

2. Stocks
While rising interest rates tend to be a tailwind for financial stocks such as banks, they are considered to be a headwind for companies with high debt and high-valuation growth stocks.
However, recently, there have been scenes where AI and semiconductor stocks have risen even under rising interest rates due to expectations of good performance, while on the other hand, there are days like October 8 when the Nikkei Stock Average plunges due to vigilance against interest rates and high crude oil prices.
It cannot be explained by the simple formula that ‘if interest rates rise, growth stocks will definitely fall.’

3. Currencies
When US interest rates rise, it tends to lead to a stronger dollar and a weaker yen, and when European fiscal anxiety intensifies, it tends to lead to a weaker euro and risk-off stock declines.
In fact, the selling of French government bonds also spread to European bank stocks and government bonds of Southern European countries.

■ 4 perspectives to keep in mind as an individual investor

① Put ‘common sense from the low-interest-rate era’ aside for a moment
The premises that ‘growth stocks are bought because interest rates are low’ and ‘bonds have small price movements’ are becoming difficult to apply.
In a phase where interest rates are high, the value of companies with sound finances that can generate cash on their own increases relatively.

② Be conscious of the linkage between bonds, stocks, and currencies
By looking at the flow of global funds (global macro) and being conscious of chains such as ‘US interest rates → dollar-yen → Japanese stocks’ and ‘European fiscal anxiety → risk-off,’ you can deal with sudden changes in the market calmly.

③ Check your own ‘interest rate sensitivity’
It is important to check once how your assets and liabilities react to rising interest rates, such as housing loans (variable or fixed), the duration of bond funds you hold, and the industry composition of your stocks.

④ Prepare for phases with volatile price movements
In phases where interest rates fluctuate sharply, the price movements of the entire stock market become larger.
There is also the idea of separating living funds from investment funds and holding a certain amount of surplus funds so that you do not have to sell in a panic.

■ Future points of attention

・October 27-28: FOMC (Reports indicate the market has almost fully priced in one more rate hike within the year)
・October 28: UK Autumn Budget (Chancellor Reeves’ first budget proposal)
・October 29-30: Bank of Japan Monetary Policy Meeting
・France: Parliamentary deliberations on the 2027 budget and the presidential election in April-May 2027

■ Conclusion

Hearing about a ‘global rise in interest rates’ may sound complicated, but in short, it means that ‘the cost of borrowing money is rising worldwide, and we have entered an era where both countries and companies are being scrutinized.’
Furthermore, this current rise is occurring due to a combination of not only fiscal anxiety but also inflation concerns driven by high crude oil prices and tightening by central banks.

Understanding these major ‘interest rate trends’ makes it easier to avoid being swayed by daily price fluctuations.
What kind of asset allocation are you mindful of in this ‘world with interest rates’?
Please share your thoughts in the comments.

[Important Notes]
This article is intended to provide information regarding market trends and economic mechanisms, and it does not solicit or recommend the buying or selling of specific financial products or investment actions.
The content includes an organization of facts based on publicly available market data as well as the author’s personal interpretation.
Please make final decisions regarding actual investment policies and asset management at your own responsibility.