Global bond markets are experiencing a significant sell-off as investors grow alarmed about the strength of the US economy and mounting inflation pressures. Government borrowing costs surged yesterday and are continuing to rise across Asia-Pacific markets this morning, dragging down share prices worldwide. The sell-off was triggered by surprisingly robust US business activity data showing expansion at the fastest pace in five years, coupled with elevated cost pressures, prompting traders to anticipate further interest rate increases from the Federal Reserve.

The economic data reveals an overheating US economy with unemployment at 4.1% and growth running above trend. Five-year US Treasury yields exceeded 5% for the first time since 2007, whilst ten-year yields surged over 5% in their largest single-day move since the 'Liberation Day' tariff announcement eighteen months ago. September flash PMI figures showed activity expanding at the fastest rate in over five years, with new orders growing at their quickest pace since April 2022 and manufacturing hiring at its strongest since February 2021. The combination of robust economic activity alongside persistent price pressures has alarmed global markets, with yields on Japanese benchmark bonds reaching their highest level in decades, as US Treasury debt serves as the benchmark for worldwide financial markets.