Faisal Islam: Why bond market wildfire is keeping world leaders up at night
Global bond markets are facing significant pressure due to rising interest rates and increased borrowing demand from both governments and major tech companies. The ongoing conflict in the Middle East and massive debt issuance for AI infrastructure are driving up borrowing costs worldwide.
Why it matters
Rising government borrowing costs can lead to fiscal instability and reduced public spending capacity in major economies.
Image source, EPA/Shutterstock By Faisal Islam Economics editor Published 1 hour ago It is not just the wildfire burning in the bond markets, with many countries facing interest rates at multi-decade highs.
The markets lending money to governments appear to be changing more fundamentally too.
Over summer, the message has been made clear: countries will have to pay more to borrow cash.
The immediate reason is the ongoing closure of the Strait of Hormuz and renewed hostilities between the US and Iran, which has pushed up inflation and, in turn, raised expectations of higher interest rates in the world's major economies.
Markets had assumed tensions would subside, and so too would oil and gas prices, ahead of the US midterm elections in November.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in