The global "debt storm" is howling, and risk assets are facing a pressure test in pricing.

The global bond market is undergoing a rare synchronized sell-off across multiple countries. From Washington to Tokyo to Frankfurt, long-term government bond yields are rising at an astonishing rate, reaching the highest levels in decades, signaling a profound shift in global capital pricing logic. On Monday (August 17), the yield on the U.S. 30-year Treasury bond briefly surpassed 5.31%, marking the highest level since June 2007, just before the onset of the global financial crisis. Simultaneously, the yield on Japan's 10-year government bonds approached 3%, marking the first time it has touched this level since September 1996; Germany's 10-year government bond yields rose above 3.22%, a new high since May 2011; and France's 10-year government bond yields surpassed 4%, the first time since 2009. The UK's 10-year bond yields are also nearing 6%. This wave of bond sell-offs spanning three continents is not driven by a single factor but is the result of multiple structural forces resonating: record bond issuances by AI mega-corporations, continuously expanding fiscal deficits by governments, rising energy prices due to conflicts in the Middle East, and a shrinking demand from Japan, the largest holder of U.S. Treasuries. This "term premium revolution" is redefining the pricing benchmarks for global assets. "Global Asset Pricing Benchmark": U.S. 30-Year Treasury Yield Returns to 2007 Levels Amid "Dual Pressure" from Fiscal Deficits and AI Bond Issuance The United States is at the eye of this bond sell-off storm. On Monday, the yield on the 30-year U.S. Treasury broke through 5.31%, reaching a nearly 19-year high. The yield on the 10-year U.S. Treasury rose simultaneously to around 4.7%. The yield on the 30-year U.S. Treasury rose nearly 40 basis points last month, marking the largest monthly increase since December 2024. The forces driving the sell-off of U.S. Treasuries are two massive waves from the supply side. The first wave is the federal government's substantial deficitprojected to reach $1.9 trillion for the fiscal year 2026, accounting for nearly 6% of GDP, continuously pushing the supply of Treasuries higher. The second wave is the record bond issuance by AI companies. Since 2026, AI mega-tech giants like Alphabet, Amazon, and Meta have raised nearly $220 billion through bond financing, and J.P. Morgan has raised its forecast for 2026 TMT (Technology, Media, Telecom) corporate dollar bond issuance by about 20% to $540 billion. Bonds from large tech companies account for approximately 25% of the long-term net issuance of U.S. Treasuries. The impact from the supply side is pushing up overall financing costs. The yield on Alphabet's 30-year bonds has reached 6.4%, 1.15 percentage points higher than that of U.S. Treasuries of the same maturity. Meanwhile, data released by the U.S. Treasury on Monday showed that in June, foreign investors' total holdings of U.S. Treasuries fell from $9.371 trillion in May to $9.299 trillion. Japan, as the largest overseas "creditor" of the U.S., saw its holdings drop to $1.116 trillion in June, a decrease of $26.4 billion in just one month. "Biggest Buyer of U.S. Treasuries": Japan's 10-Year Government Bond Yields Near 3%, a "Return to Rates" Not Seen in 30 Years Japan's bond market is experiencing a historic normalization of interest rates. The yield on the 10-year Japanese government bond rose for the seventh consecutive trading day on Tuesday, peaking at 2.945%, the highest level since September 1996. The yield on the 30-year Japanese government bond also rose to approximately 4.06%. The driving force behind this surge is the market's strong expectation of a faster rate hike by the Bank of Japan. The minutes from the July meeting sent strong hawkish signals, with several members calling for a "speeding up of interest rate hikes," and warned that "the risks of waiting are no longer marginal." Overnight swap data indicates that the market believes there is about a two-thirds probability of a rate hike by the Bank of Japan in September, with the probability rising to 96% in October. The rise in domestic yields in Japan is prompting a realignment of global capital. As the yield on Japan's 30-year government bonds rises to about 4%, Japanese investorshistorically the biggest buyers of U.S. Treasuriesare being attracted back home. In June, Japans total holdings of U.S. Treasuries fell from $1.143 trillion in May to $1.116 trillion. Charu Chanana, Chief Investment Strategist at Saxo Bank, noted: "This does not mean Japan is abandoning U.S. Treasuries, but it does signify that Washington can no longer assume that foreign demand will absorb new supply at yesterday's yields." Europe: Germany and France Simultaneously Reach Multi-Year Highs, Accelerating Fiscal Concerns The European bond market has also not been spared. The yield on Germany's 10-year government bond closed at 3.223% on Monday, approaching the second-quarter peak of 3.505% in 2011. The yield on France's 10-year government bond briefly exceeded 4.05%, rising about 11 basis points intraday, rewriting the highest level since 2009. The yield on France's 30-year government bond also rose to 4.86%, returning to near the highest level in nearly two decades. Pressure in the European market is spreading from Germany to other major economies like France. Concerns about high fiscal deficits and massive debt burdens in France are intensifying. In addition, the rise in energy prices due to conflicts in the Middle East, along with the resulting inflationary pressures, is also considered a significant factor driving the sell-off of European bonds. Common Drivers: A Global "Term Premium Revolution" Although domestic factors vary from country to country, the fundamental drivers pushing long-term yields higher exhibit clear global characteristics. First, inflation anxiety has resurfaced. Oil prices have returned to above $90 per barrel, and hopes for peace between the U.S. and Iran are gradually diminishing, exacerbating market concerns that inflation will remain persistently high. Second, the "capital competition" between the AI bond issuance wave and fiscal deficits. As Jin Ten Data has pointed out, long-term bonds are becoming the focal point of investor anxiety, with various concernsranging from inflation to the debt-laden AI boomall converging in this market. The massive financing needs of AI companies and the ever-expanding bond issuance plans of governments are competing for limited capital. Third, weakened demand from traditional buyers. Changes in market structure and demographics have led to a reduction in previously stable buyer demand. Japanese investors are flowing back domestically due to rising local yields, further eroding demand for overseas assets like U.S. Treasuries. Fourth, inflation remains persistently above target. The inflation rate has consistently exceeded the Federal Reserve's 2% target over the past five years, compelling investors to seek higher risk compensation for long-term government bonds. Market Impact and Future Outlook The soaring costs of long-term borrowing are triggering a chain reaction across the broader economy. Sovereign debt yields serve as a benchmark for borrowing costs for corporate loans and mortgages. With the average rate on 30-year fixed-rate mortgages now rising to 6.69%, the financing environment for businesses and households is tightening significantly. Currently, the market sees the range of 5.0% to 5.3% for the yield on U.S. 10-year Treasuries as a global core warning line. KB Securities Chief Strategist Lee Eun-taek warns that if the 10-year Treasury yield continues to break above 5% (reaching 2007 levels) or even 5.3% (25-year highs), it will prompt global investors to shift from "risk preference" to "capital preservation," potentially leading to a temporary contraction of the funding chain for AI and large tech sectors. Charu Chanana, Chief Investment Strategist at Saxo Bank, stated: "The market requires a higher term premium for holding long-term government bonds." Chris Iggo, Chief Investment Officer at AXA IM Core, pointed out: "It is hard to judge at what yield levels the total return prospects for long-dated fixed-income assets might improve. The only factor that might change this condition would be if economic data suddenly weakens or some external shock occurs, with the latter seeming more likely than the former." As of August 18, this global bond sell-off has spread from the U.S. to European and Asian markets. Under the combined pressures of the AI bond issuance wave, massive fiscal deficits, and geopolitical risks, the long-term borrowing coststhis "anchor" of global asset pricingmay still require a longer period for recalibration, and its impact on the stock market should not be underestimated. Transmission Mechanisms: Three Pathways to Analyze How U.S. Treasury Yields Impact the AI Bull Market Pathway 1: Valuation ReassessmentHigher Discount Rates, Lower Present Values. Long-end U.S. Treasury yields serve as the anchor for pricing global risk assets. When the yield on the 30-year Treasury rises from below 5% to over 5.3%, all valuation models for growth assets reliant on future cash flows need to be recalibrated. AI companiesespecially those that have not achieved stable profitability in hardware and model developmentare particularly sensitive to changes in discount rates. The expanded decline in U.S. stock futures (with Nasdaq futures down 1% and S&P down 0.4%) reflects this immediate pressure. Pathway 2: Rising Financing CostsDebt-Driven AI Expansion Models Under Pressure. The expansion of AI infrastructure heavily relies on debt financing. The rise of the 30-year U.S. Treasury yield from below 5% to over 5.3% in the past week means that any AI infrastructure projects dependent on long-term debt financing will face higher interest costs. Lee Eun-taek, Chief Strategist at KB Securities, points out that while large tech companies may continue to invest to avoid falling behind in the AI race, higher interest rates could prompt funding institutions to scale back their financing. Pathway 3: Reversal of Capital FlowsFunds Flowing Back from Emerging Markets to U.S. Treasuries. When risk-free interest rates rise above 5%, U.S. Treasuries become an incredibly attractive asset class. The pressure for funds to flow back from emerging market equities to the U.S. bond market increases. On August 18, South Korean KOSPI institutional investors saw a net sell-off of 785.4 billion won in a single day, while foreign investors and retail investors recorded net purchases of 86.5 billion won and 731 billion won, respectivelyreflecting the large-scale withdrawal by institutions and exemplifying this logic.