Why Global Bond Yields Are Surging

Government bond yields have surged to multi-decade highs across the US, UK, Germany, and Japan. George Cole, head of European Rates Strategy for Goldman Sachs Research, says there is a range of factors behind the bond sell-off—from swelling fiscal deficits and borrowing tied to investment in artificial intelligence (AI) to resilient economic growth and an energy-price shock. In this episode of Goldman Sachs Exchanges, he also explains what could bring yields back down. Key takeaways: 1. Low volatility signals a fundamental move:  While global yields have been climbing, bond market volatility has been notably low. Cole says this makes it harder to dismiss the sell-off as technical noise and points instead to fundamentally driven factors. 2. Everyone is borrowing from the same pool of savings: Governments raising money for deficits and defense spending are now competing with companies borrowing heavily to fund AI buildouts, Cole says. With more borrowers chasing the same pool of global savings, rates get pushed up almost mechanically, regardless of what any single government does. 3. Bonds could become a better hedge:  Over the next few years, Cole says five-year bond yields could have more room to decline, making those securities a better hedge for portfolios. [00:00] Introduction [00:27] Global Bond Yields Surge [01:36] Drivers Behind Rising Yields [07:59] US Treasury Bond Buybacks [13:49] Fiscal Pressures on Rates [16:32] Historical Context for Yields [20:14] Outlook for Rates [23:30] Advice for Investors The opinions and views expressed herein are as of the date of publication, subject to change without notice, and may not necessarily reflect the institutional views of Goldman Sachs or its affiliates. The material provided is intended for informational purposes only, and does not constitute investment advice, a recommendation from any Goldman Sachs entity to take any particular action, or an offer or solicitation to purchase or sell any securities or financial products. This material may contain forward-looking statements. Past performance is not indicative of future results. Neither Goldman Sachs nor any of its affiliates…