The Intimidating Influence of the Bond Market on Global Finance

Financial crises tend to reemerge over time, rarely disappearing entirely—a recurring theme during the current administration.

Investors are advised to remain calm and adopt a long-term perspective, but ongoing disruptions such as intermittent tariffs, looming budget deficits, and a volatile stock market have stirred considerable unease. The recent surge in global bond yields only adds to these concerns, creating a challenging environment for market participants.

Although bond markets have traditionally drawn less attention than stocks in the United States, their capacity to influence the broader economy and provoke market anxiety remains significant. This influence is evident once again as bond yields climb.

Reflecting on the bond market's power, political strategist James Carville once remarked in the 1990s, "I used to think that if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."

While I personally would prefer to return as the world’s top tennis player, I recognize the truth in Carville’s observation. Turbulence in fixed-income markets has the unique ability to command the attention of policymakers in ways that even sports achievements cannot.

Recently, yields on long-term bonds—those maturing in 20 years or more—have surged to levels not seen in decades, both in Tokyo and New York. Although yields have eased slightly, they remain elevated. Media coverage has largely focused on U.S. bond yields, but challenges in Japan’s government bond auctions have also played a role, contributing to upward pressure on U.S. Treasury yields.