Government borrowing costs hit multi-year highs as markets fear inflation, and oil and gas prices rise – business live
Government bond yields rise as markets anticipate interest rate hikes
Government borrowing costs in France, Germany and Japan are all hitting multi-year highs today, as investors fear the Middle East crisis will keep inflation persistently high.
The yield, or interest rate, on 30-year French bonds has risen to its highest level since September 2008 – the start of the financial crisis – at 4.8558%, up one basis point (0.01 percentage point) today, Reuters reports.
France’s 10-year bond yield has hit its highest level since June 2009, up 1 bp to 4.0516%. The equivalent German bond has hit its highest yield since 2011 at 3.2138%, up 1.5bps.
The real drama is in Tokyo, though, where the 10-year Japanese government bond yield hit a three-decade high. The 10-year JGB yield rose to 2.93%, its highest level since September 1996, before dipping back slightly after Japan’s GDP report came in weaker than expected (see earlier post).
Fears that central banks will continue to tighten monetary policy, to prevent inflation bursting out of control, are pushing up bond yields – as traders seek a higher rate of return for holding government debt.
Axel Rudolph, chief technical analyst at IG, explains:
“Japan’s 10-year bond yield has surged to its highest level since 1996, as markets increasingly price in a Bank of Japan rate hike as soon as September.
The irony is that this comes despite weaker-than-expected GDP, with soft domestic demand raising questions over the strength of the recovery. Persistent yen weakness and inflation pressures are strengthening the case for action, while uncertainty over how the government will fund its proposed food tax cut adds another layer of fiscal concern.
Japan’s bond market is clearly becoming less forgiving, and the BOJ may soon have to choose between supporting a fragile economy and containing inflation.”
Last week, the US sold new 30-year bonds at the highest yield in 25 years, as Washington was forced to pay a higher rate on its debt to persuade buyers to snaffle it up [bond yields rise when bond prices fall].
Key events
US 30-year Treasury yield hits highest since 2007
US government long-term borrowing costs have also hit their highest level since the financial crisis.
The US 30-year Treasury yield has just reached 5.29%, its highest level since 2007.
Government bond yields rise as markets anticipate interest rate hikes
Government borrowing costs in France, Germany and Japan are all hitting multi-year highs today, as investors fear the Middle East crisis will keep inflation persistently high.
The yield, or interest rate, on 30-year French bonds has risen to its highest level since September 2008 – the start of the financial crisis – at 4.8558%, up one basis point (0.01 percentage point) today, Reuters reports.
France’s 10-year bond yield has hit its highest level since June 2009, up 1 bp to 4.0516%. The equivalent German bond has hit its highest yield since 2011 at 3.2138%, up 1.5bps.
The real drama is in Tokyo, though, where the 10-year Japanese government bond yield hit a three-decade high. The 10-year JGB yield rose to 2.93%, its highest level since September 1996, before dipping back slightly after Japan’s GDP report came in weaker than expected (see earlier post).
Fears that central banks will continue to tighten monetary policy, to prevent inflation bursting out of control, are pushing up bond yields – as traders seek a higher rate of return for holding government debt.
Axel Rudolph, chief technical analyst at IG, explains:
“Japan’s 10-year bond yield has surged to its highest level since 1996, as markets increasingly price in a Bank of Japan rate hike as soon as September.
The irony is that this comes despite weaker-than-expected GDP, with soft domestic demand raising questions over the strength of the recovery. Persistent yen weakness and inflation pressures are strengthening the case for action, while uncertainty over how the government will fund its proposed food tax cut adds another layer of fiscal concern.
Japan’s bond market is clearly becoming less forgiving, and the BOJ may soon have to choose between supporting a fragile economy and containing inflation.”
Last week, the US sold new 30-year bonds at the highest yield in 25 years, as Washington was forced to pay a higher rate on its debt to persuade buyers to snaffle it up [bond yields rise when bond prices fall].
Pricier gasoline pushes up Canadian inflation
Over in Canada, inflation has picked up, lifted by higher prices for motor fuel.
The Canadian Consumer Price Index (CPI) rose 3.0% year over year in July, up from a 2.8% gain in June.
Statistics Canada reports that higher prices for gasoline and travel tours in July pushed inflation higher, while food prices rose at a slower rate.
On a yearly basis, prices for gasoline jumped by over 25%, up from 20.5% in the year to June.
“The conflict in the Middle East, including the blockade of the Strait of Hormuz and the partial closure of Red Sea shipping routes in late July, put upward pressure on gasoline prices,” today’s inflation report says.
Alex Daniel
The first person to buy Ferrari’s polarising new electric supercar is reportedly an American billionaire optometrist who bid $40m (£29.5m) for the vehicle in an auction for charity.
Dr Herbert “Herbie” Wertheim, who has an estimated fortune of $4.9bn, bought the tailor-made edition of the car last week at Monterey Car Week, according to the Telegraph.
Often seen wearing a red fedora, Wertheim, 87, is a self-made billionaire who struggled at school but went on to found the optical equipment maker Brain Power Inc in 1971, and launch a philanthropic foundation six years later.
The car is only expected to sell for €550,000 (£470,000) when it is released commercially next year, so the auction price may yet provide some cheer for Ferrari’s embattled top brass, who saw shares in the company fall 8% when it was revealed to the public.
The Luce – pronounced “loo-chey”, Italian for “light” – faced widespread ridicule when it was launched in May, despite its design being led by the former Apple executive Jony Ive in collaboration with Marc Newson.
Its launch imagery drew unwelcome comparisons to the latest version of the Nissan Leaf, while Luca di Montezemolo, who led Ferrari for 23 years, said at the time: “We’re risking the destruction of a legend.”
Senior Russian banker fired after scathing speech on wartime economy
The chief economist at Russia’s second-largest bank has been fired after a series of critical comments about the state of the economy, including warnings that Moscow would not win a prolonged economic war with Ukraine.
Andrei Klepach, who had served in the role at the state-controlled development bank VEB since 2014, was fired days after Russian media reported on a scathing speech he had delivered to fellow economists in May.
In the remarks, first reported by the Moscow Times, Klepach said Russia was “falling behind” China and the US economically, and “in some respects, Ukraine”.
Klepach said pressures on Russia’s economy due to the war would inevitably lead to a “social crisis” that would erupt “when no one particularly expects it”.
More here, by our colleague Pjotr Sauer:
It’s not terribly unusual for economists attract criticism for their views, but rare for them to be fired over them.
In 2019, UBS economist Paul Donovan was briefly suspended, after commenting that a swine flu outbreak only “matters if you are a Chinese pig” or “if you like eating pork in China” – remarks wrongly interpreted to be racist.
And in January, Deutsche Bank’s George Saravelos upset Washington after writing that Donald Trump’s trade war threats could spur European investors could sell US assets.
In other energy news, French daily power prices have hit their highest since January 2025.
Bloomberg reports that day-ahead French power prices for Monday advanced to €177.34 a megawatt-hour, according to data from Epex Spot.
This is blamed on heat-related outages at France’s nuclear plants – several had to close due to rising water temperatures and falling river levels (and a swarm of jellyfish) – and cloudier conditions in Europe which curbed solar generation.
Here’s our news story on Jamie Dimon’s opposition to new bank taxes, and the backlash….
TUC: Banks should pay their fair share
The TUC has criticised JP Morgan’s CEO for his opposition to higher bank taxes (see earlier post).
TUC general secretary Paul Nowak said this morning:
“Let’s be clear. Jamie Dimon doesn’t want banks like his to pay their fair share. But while bank profits continue to soar, ordinary working people are paying more in bigger bills and higher mortgage rates.
“People are sick and tired of being told they have to tighten their belts while profits, dividends and bankers’ bonuses hit record highs. The new Chancellor has a clear opportunity to show working people he’s on their side by asking banks to pay fair taxes to cut energy bills.”
Oil and gas prices rise as Hormuz shipping activity slows again
Alex Daniel
Oil and gas prices are heading higher again this morning after reduced traffic through the Strait of Hormuz and rising concerns that a ceasefire may not be imminent in the region.
The number of ships passing through the strait ground virtually to a halt over the weekend after fresh attacks on oil tankers last week.
Data from the ship-tracking company Kpler said only five commodity vessels passed through the waterway on Saturday, while none were recorded on Sunday. That’s compared with 31 the weekend before.
Brent crude was trading at about $89.49 per barrel, up 1.1%. Gas prices were also up, with the UK’s one month ahead benchmark at 153p per therm, or 1.36% up.
Last week, president Donald Trump threatened to declare the strait of Hormuz as “a territory of the United States”, part of a pattern of escalating rhetoric that has dampened hopes of a ceasefire between the US and Iran.
Musicians urge Burnham to reject Rosebank
Lauren Almeida
More than 200 musicians including Massive Attack and Brian Eno have written to Andy Burnham, urging him to reject plans for more oil and gas drilling in the North Sea.
The letter, signed by artists such as Olly Alexander and Paris Paloma, called on the prime minister to reject the Rosebank oilfield, warning the project will fail to lower energy bills or provide energy security as most of the oil is likely to be exported.
The government’s consultation on the project, which lies about 80 miles north-west of the Shetland Islands, closed on Monday. Ministers will now decide on its future as well as that of the Jackdaw gasfield off Aberdeen, whose consultation concluded a week ago.
Adura, the company behind both projects, has said the projects would result in £10.8bn in investment and support 3,500 jobs at the peak of construction, with 880 employees over its production lifetime.
Looking back at this morning’s Rightmove data – here are a few more charts showing how the UK housing market has weakened in recent months:
