The tables have turned

The Long end of the curve is where the story is right now. Every long end of every curve. The US 10Y is near 4.7%, highest since Jan 2025; 30Y broke 5% and hit a ~19-year high near 5.2%. The Fed has passed the batton to the bond market to produce rates forward guidance. That implies volatility. Sticky inflation plus a Fed now debating hikes, not cuts, is repricing the whole curve. in the UK, 30Y gilts are near 5.7–5.8%, the highest since the late 1990s. New spending pledges from Westminster are colliding with an already stretched fiscal position. In Japan, 30Y JGBs are at record highs (dating back to the bond’s 1999 launch), 10Y at a 30-year high. Takaichi’s large fiscal package plus a weak yen is forcing the BOJ’s hand even as it tries to keep policy easy. And in Germany, 10Y bunds are at their highest since 2011. Even Europe’s fiscal “anchor” is being pulled up by the same global forces. In other words, it’s a DM problem, not an EM one. The bonds under the most stress right now are the safe ones, US, UK, Japan, Germany, not emerging markets. That’s unusual. Historically, global bond selloffs hit EM hardest first (currency risk, capital flight, dollar funding stress). This cycle, it’s the reverse: DM long-end yields are rising because of fiscal deficits, heavy issuance, and inflation that won’t fully die. It’s a “term premium” problem, where investors demand more compensation to hold 30-year paper from governments spending like there’s no ceiling. EM sovereigns, by contrast, have been comparatively disciplined, lower deficits, real yields still attractive, and several central banks (Brazil, Mexico, others) with room to cut. EM debt has actually outperformed DM debt over the past year. The biggest systemic risk isn’t a single country defaulting, it’s the cost-of-capital shock rippling out from the “risk-free” rate. When US, UK, and Japanese long bonds, the benchmarks every mortgage, corporate loan, and pension liability is priced off, become more volatile and more expensive, that pressure transmits everywhere: higher borrowing costs for governments already running large deficits, tighter financial conditions for households and companies, and less room for central banks to cut without reigniting inflation. The old script (crisis starts in EM, spreads to DM) has flipped. Right now, the fragility is concentrated at the core of the system, and EM looks like the more stable corner of the map.

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