The world is in a debt spiral and alarm signals are going off

September 1, 2026 — 12:10pm

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Global bond yields are reaching levels not seen in nearly two decades, creating a threat to economic and financial stability around the world. It’s a threat that has been exacerbated by US policies.

On Monday, Japan’s 10-year bond yield hit a 30-year high of 2.95 per cent amid expectations that the Bank of Japan will raise its policy rate later this month. US 10-year yields also rose, despite the perceived “hawkishness” of the Federal Reserve Board’s chair Kevin Warsh at the weekend’s annual meeting of central bankers and economists at Jackson Hole in Wyoming.

In France, Germany, Italy, Spain and the UK, yields on benchmark 10-year government bonds are at levels last seen before the 2008 financial crisis. Here in Australia, the 10-year bond yield is at its highest level in a decade and a half. Only in China, with growth slowing markedly and expectations of an imminent monetary policy easing, have yields been falling.

The worldwide spike in yields has been occurring across the backdrop of swelling levels of global debt.

The Institute of International Finance (IIF) earlier this year estimated that global debt levels had surpassed $US350 trillion ($488 trillion), or 305 per cent of global GDP, with public sector debt of about $US111 trillion.

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Stephen BartholomeuszSenior business columnist

Senior business columnist

At the core of the global bond system is the US Treasury market, where the yield on 10-year bonds has risen from its pandemic-era low of less than 60 basis points in 2020 to 4.75 per cent as US government debt has ballooned from about $US26.5 trillion to more than $US40 trillion.

The rest of the developed world is confronting much the same problem, with the soaring interest costs on vastly........

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