The global government bond market experienced its worst quarter since 2024

The third quarter of 2026 was the worst for government bonds worldwide since 2024, according to Bloomberg. Brent crude prices above $100 per barrel are reigniting fears in the markets of an inflationary shock to the global economy, the agency notes.

The Bloomberg Global Bond Index has fallen by more than 2% since June. The last time it fell this sharply over a comparable period was in late 2024, when Donald Trump won the U.S. presidential election and investors were bracing for fiscal easing.

The sell-off in the bond markets has been ongoing for over a month. This week, on September 29, the yield on 30-year U.S. Treasuries exceeded 5.61%, reaching levels not seen since 2002. Bonds with shorter maturities also suffered losses, although some of those losses were recouped after the Federal Reserve’s preferred inflation gauge came in below forecasts on October 30.

In other bond markets, France experienced the most severe sell-off. The yield on 10-year French government bonds rose by 1.15 percentage points to 4.8%, marking the worst quarterly performance at least since the introduction of the euro in 1999. The country’s bond market saw its sharpest decline on September 30: the latest inflation data from France showed that price growth in September accelerated to its highest level in more than two years, putting additional pressure on the ECB, which has already raised rates twice this year.

“The third quarter didn’t just dash hopes that interest rates would remain low for a long time—it literally doused them with low-grade diesel and set them on fire,” said Rabobank global strategist Michael Avery, adding that the main question now is how many more rate hikes to expect.

According to Bloomberg, financial markets have already priced in three more rate hikes by the Federal Reserve and the European Central Bank over the next year.

The ongoing war in the Middle East, the rapid rise in spending on artificial intelligence, and the resilient U.S. economy are signaling to investors that inflation could turn out to be a much more serious problem than previously anticipated, the agency notes. In response, the central banks of Australia, the European Union, Japan, Norway, and the United States have raised interest rates over the past three months.

This article was AI-translated and verified by a human editor