Long-term Government Bonds are being shunned by investors. Although the yields on 30-year Government Bonds in major countries, including the United States, have surged, the buying momentum is slowing down. There are analyses suggesting that the 'triple burden' of high interest rates, national debt, and policy uncertainty is diminishing the investment appeal of long-term bonds.
According to Bloomberg News on the 13th (local time), the yield of the U.S. 30-year Government Bonds surpassed 5% at the end of last month, nearing its highest level since 2007. Jamie Dimon, the CEO of JPMorgan, warned, "If the government's fiscal management continues as is, there could be cracks in the bond market." In fact, the U.S. is increasing its budget deficit while pursuing a tax cut policy along with high tariffs, which is stirring anxiety among bond investors.
An increase in long-term bond yields also signals that fewer investors are willing to hold those bonds. Bloomberg News reported that while there has been a sustained level of demand for U.S. Government Bonds in auctions, long-term bonds from other countries are being overlooked by investors. Experts noted, "Investors are increasingly feeling burdened by locking up funds for an extended period until maturity."
Concerns about price volatility also contribute to the aversion to long-term bonds. Long-term bonds are sensitive to interest rates, and as rates rise, their prices can drop significantly; this risk increases with longer maturities. Particularly since the COVID-19 pandemic, as governments around the world have taken on significant liabilities and the high interest rate trend has been prolonged, the burden of debt is becoming even heavier. The International Institute of Finance (IIF) stated that global debt reached a record-high level of $324 trillion in the first quarter.
Another concern for investors is inflation and interest rates. In the U.S., inflation is not declining as quickly as expected. Additionally, there are worries that President Donald Trump’s intention to impose tariffs again could further drive up prices. Conversely, if the economy slows down, the Central Bank may have to lower interest rates again. This raises concerns that 'stagflation,' where prices rise while the economy worsens, may occur.
Consequently, the market is expressing evaluations such as, "Bonds should be safe assets, but now they are viewed more as a symbol of volatility and risk." In fact, Moody's recently downgraded the credit rating of the U.S., expressing concerns that fiscal instability could threaten the U.S. position in global capital markets.