Global fixed-income markets continue to reflect a materially tighter financial environment than at the end of 2025. Yields have risen sharply across the US, Europe, UK, and Japan, while China remains the major exception as deflationary pressure and accommodative monetary policy keep government bond yields low.
US Treasury yields remain elevated across the curve. The 2-year Treasury yields 4.703%, up 128 basis points year-to-date, while the 5-year stands at 4.821%, the 10-year at 5.000%, and the 30-year at 5.316%.
The curve is positively sloped across all major segments, representing a significant shift from the inversion that characterized much of 2023 and 2024. The repricing reflects higher terminal-rate expectations alongside a recovery in the term premium at longer maturities.
The 10-year Treasury around the psychologically significant 5% level remains an important market focus, increasing the hurdle rate for equity valuations and raising debt-servicing costs for leveraged borrowers.
European sovereign yields have also moved substantially higher. Germany's 2-year Bund yields 3.102%, the 5-year 3.199%, and the 10-year 3.374%.
France remains a particular focus. The 10-year OAT yields 4.981%, approximately 161 basis points above the German Bund, reflecting ongoing fiscal concerns. Italy's 10-year BTP yields 4.564%, leaving its spread over Germany at approximately 119 basis points.
France consequently continues to trade at a wider spread to Germany than Italy, reversing the traditional risk hierarchy and highlighting the degree of fiscal pressure currently being priced into French sovereign debt.
UK Gilts have experienced the most aggressive year-to-date rise in yields among the five regions covered. The 2-year Gilt yields 4.922%, the 5-year 4.987%, the 10-year 5.343%, and the 30-year 5.742%.
With the Bank of England base rate at 3.75%, the 2-year Gilt trades approximately 117 basis points above the policy rate. The 10-year yield also remains above its US equivalent, while the elevated 30-year yield reflects continued concerns surrounding fiscal sustainability and long-duration supply.
China remains the clear exception. The 2-year Chinese Government Bond yields only 1.240%, the 5-year 1.354%, and the 10-year 1.629%, with yields declining across the curve during 2026.
The environment reflects continued deflationary pressure and an accommodative PBOC stance. Stress nevertheless remains significant in offshore high-yield credit, where average yields stand at 18.2% and spreads around 1,362 basis points, reflecting continued distress among property-sector issuers.
Japan's government bond market continues its structural repricing as the Bank of Japan normalizes monetary policy. The 2-year JGB yields 1.893%, the 5-year 2.247%, the 10-year 2.801%, and the 30-year 3.840%.
The 10-year yield remains at levels not seen in decades, marking a clear break from the yield curve control era. Higher domestic yields may also reduce Japanese investors' incentive to hold foreign bonds, with potential implications for demand for US Treasuries and other global fixed-income assets.
