The 30-year U.S. Treasury yield climbed to 5.324 percent on Tuesday, its highest reading since June 2007, as a global rout in long-dated government debt accelerated after the U.S.-Iran ceasefire lapsed without an agreement and President Trump renewed a threat to bomb Oman.

The selloff pushed benchmark borrowing costs to multi-decade or multi-year peaks in Washington, London, Berlin, Paris and Tokyo, raising the price of nearly every long loan denominated in the world's major reserve currencies. Governments are preparing to borrow more against a backdrop of rising defense budgets, heavy corporate issuance and higher oil, and bond investors are charging them for it.

Around the curve

The 10-year Treasury yield rose to 4.736 percent. Britain's 10-year gilt climbed 2.6 basis points to 5.076 percent. Germany's 10-year Bund reached its highest level since 2011, and France's equivalent hit a 16-year peak. On Monday, French 30-year debt yielded 4.8558 percent, the most since September 2008. Japan's 10-year government bond added 2.5 basis points to 2.945 percent on Tuesday, the highest in three decades, after touching 2.93 percent a day earlier, a level unseen since September 1996. Bond yields move inversely to prices; the price of long-dated paper fell across the board.

The Iran overlay

Brent crude climbed above $91 a barrel Tuesday, extending a 6 percent gain the previous week, after Trump threatened to bomb Oman if it "gets in the way" of his effort to end the war on Iran. The ceasefire between Washington and Tehran ended Monday night without an agreement and with no progress on reopening the Strait of Hormuz.

Traders have begun repricing central-bank paths on the assumption that costlier energy will lift headline inflation. Money markets imply nearly an 85 percent probability that the European Central Bank raises rates at its September meeting, the Guardian reported. In Tokyo, futures point to a Bank of Japan move as soon as September to shore up the yen.

What the desks are saying

"Rising long-dated bond yields are not driven solely by expectations of higher interest rates and inflation fears. They can also reflect concerns around high levels of government borrowing and investors demanding greater compensation for the risks of holding long-dated government bonds," Dan Coatsworth, head of markets at AJ Bell, told the Guardian.

Neil Wilson, an investor strategist at Saxo UK, told the same paper: "We are seeing bond yields across developed markets strike multi-year highs as fixed income investors grow nervous about a range of factors, from inflation and the Iran conflict to deeper structural concerns and fiscal worries. Issuance is clearly a factor – both on the government side (they can't stop spending!) and on the corporate side (AI capex)."

The supply pressure is compounding. European capitals have telegraphed larger defense budgets, and American technology companies are financing record artificial-intelligence build-outs with corporate debt that competes with Treasuries for the same pool of long-duration capital.

Tokyo's bind

Japan's bond market has become the sharpest expression of the global repricing. The 10-year Japanese government bond briefly retraced part of Monday's move after a weaker-than-expected April-June GDP reading complicated the Bank of Japan's calculus, then resumed climbing on Tuesday. Analysts cited persistent yen weakness, sticky inflation and uncertainty over how Tokyo will fund a proposed food-tax cut.

Axel Rudolph, a chief technical analyst at IG, wrote: "Persistent yen weakness and inflation pressures are strengthening the case for action, while uncertainty over how the government will fund its proposed food tax cut adds another layer of fiscal concern. Japan's bond market is clearly becoming less forgiving, and the BoJ may soon have to choose between supporting a fragile economy and containing inflation."

Counterpoint

Tuesday's dispatches came only from left-leaning British reporters at the Guardian; U.S. Treasury and Federal Reserve officials had not publicly addressed the long-end move by press time, and no voice from the Trump administration, the European Central Bank, the Bank of Japan or Iranian negotiators appeared in the day's coverage. The moves themselves were also not uniformly one-way: Japan's 10-year yield gave back part of its Monday gain after softer-than-expected April-June GDP data revived doubts about how quickly the Bank of Japan could actually tighten.

What to watch

The Federal Reserve's next rate meeting falls in mid-September. The European Central Bank and the Bank of Japan are also expected to decide on rates in September. A resumption of U.S.-Iran talks, or a first tanker cleared through the Strait of Hormuz, would relieve pressure on the long end faster than any central-bank statement.