Global Bonds Face Worst Quarterly Loss Since 2024 Amid Inflation Fears

Global government bonds are on track to close their most difficult quarter since 2024. This downturn coincides with the return of inflation shock fears to the global economy after crude oil reached $100 per barrel.

Bloomberg Index Decline and US Treasury Impact

The Bloomberg Global Aggregate Index has dropped by 2.1% since June. This represents the largest decline recorded in a single quarter since late 2024, when Donald Trump secured his second term as US president.

US Treasuries suffered significant losses during the recent sell-off. The yield on 30-year notes exceeded 5.61% on Tuesday, reaching a level not seen since 2002.

Inflation Data and Central Bank Responses

Short-term bonds also faced pressure during this period. However, they reduced some of their losses after Wednesday’s release of the Federal Reserve’s preferred inflation indicator came in below expectations.

Ongoing conflict in the Middle East, combined with an artificial intelligence spending boom and robust US economic activity, suggests inflation may pose a greater threat than investors initially anticipated.

Central banks in Australia, the European Union, Japan, Norway, and the United States raised interest rates over the past three months in response to these developments.

Michael Every, a global strategist at Rabobank, stated that markets are now focused on the number of additional rate hikes still expected.

French Debt Market Under Pressure

France experienced the sharpest wave of selling among major debt markets. Investor anxiety stems from the presidential election scheduled for next year.

Opposition parties have refused to reach a settlement with President Emmanuel Macron’s outgoing administration just seven months before the vote.

Yields on French 10-year bonds rose by 1.15 percentage points to reach 4.8%. This marks the country's worst quarterly performance since 1999.