Bond Markets Face Renewed Turbulence as Heavy Government Debt Sales Loom

August 28, 2025 – Global bond markets remained under pressure this week as governments in Europe, the United States, and Asia prepare a new wave of long-term debt issuance, raising concerns about whether investors can absorb the supply without pushing yields higher.

In Europe, 30-year borrowing costs for Germany and France climbed to their highest levels since 2011, reflecting both the scale of upcoming auctions and persistent worries over fiscal sustainability. France’s political uncertainty has added an extra layer of risk, while in Britain, long-dated gilts are on track for their biggest monthly rise in yields since December.

Japan has also been in focus, with 30-year government bond yields touching fresh record highs as traders increasingly bet on further tightening from the Bank of Japan. Meanwhile, in the U.S., recent political moves that cast doubt on the Federal Reserve’s independence have unsettled investors, amplifying sensitivity to long-term Treasury supply.

Analysts estimate that euro area governments will issue around €100 billion in debt over September and October, despite most of their annual funding already completed. Market participants note that recent auctions in both the U.S. and Japan drew weaker demand than expected, underlining investor caution.

Long-term structural changes may also weigh on demand. Shifts in pension systems—such as the Netherlands’ move from defined benefit to defined contribution schemes—are seen reducing appetite for ultra-long maturities, potentially leaving governments more reliant on foreign buyers and short-term investors.

With inflation still elevated in key economies and fiscal needs showing little sign of easing, strategists warn that volatility in government bonds is likely to persist. Higher yields could raise borrowing costs for both states and corporations, complicating efforts by central banks to manage monetary policy at a time of fragile global growth.