A global bond selloff triggered by surging corporate debt issuance and concerns over developed nations' fiscal conditions is intensifying, weighing down US Treasuries and European bonds while spreading to Japanese markets.

On Wednesday, September 3rd, Japan's 20-year government bond yield climbed to its highest level since 1999, while the 30-year yield reached a record high. Meanwhile, US 30-year Treasury yields remain near 5% after surging on Tuesday and dragging down Wall Street stocks. In Europe, German long-term bond futures have declined for the fifth consecutive trading session.

Higher yields are diminishing equity attractiveness, leading to widespread pressure across Asian stock markets. In currency markets, domestic political uncertainty is weakening the Japanese yen, while the dollar index has risen for the second consecutive day. Spot gold gained 0.1%.

The Nikkei 225 index fell 1% to 41,886.93 points. Japan's Topix index dropped 1%. Euro Stoxx 50 futures rose 0.3%. S&P 500 futures showed little change. Taiwan's weighted index closed up 0.3% at 24,100.30 points. The euro remained virtually unchanged at $1.1632. The yen declined 0.1% against the dollar to 148.58. The 10-year US Treasury yield rose two basis points to 4.28%. Japan's 10-year government bond yield held steady at 1.625%. West Texas Intermediate crude oil fell 0.3% to $65.42 per barrel. Spot gold rose 0.1% to $3,537.08 per ounce. Bitcoin declined 0.3% to $111,050.86.

**Record Debt Issuance and Fiscal Deficit Concerns**

Record corporate bond issuance volumes served as the immediate catalyst for the current selloff. On Tuesday, global borrowers issued at least $90 billion worth of investment-grade debt, making this one of the busiest weeks for global credit markets this year, with some markets approaching or breaking records. European single-day bond issuance reached a record 49.6 billion euros.

Strategist Garfield Reynolds noted that while the global economy appears to be handling pressures from President Trump's tariff policies relatively well, this has reignited concerns that emerged in 2024 about debt sustainability potentially driving yields higher for years to come:

"The sharp rise in yields could limit any stock market rally, as rising borrowing costs are sufficient to damage corporate prospects."

Despite recent selling, the Bloomberg Global Aggregate Index, which measures global bond performance, has still returned 6.7% year-to-date, though it recorded its largest single-day decline since June 6th on Tuesday.

**Japan's Political Turbulence Intensifies Bond Market Pressure**

In Japan, local factors are further exacerbating bond market selling pressure. Beyond following global trends, investors are concerned about domestic political uncertainty. A key ally of Prime Minister Shigeru Ishiba previously indicated he would resign from his position as Liberal Democratic Party Secretary-General if approved by the Prime Minister, adding variables to the political landscape.

Additionally, market caution ahead of Thursday's 30-year government bond auction is creating selling pressure on ultra-long bonds. Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management, stated:

"As a bond investor, I maintain low duration exposure in Japan and avoid longer-term bonds globally. I'm very cautious about this 30-year government bond auction, with both global and local factors pushing yields higher."

On Wednesday, Japan's 30-year government bond yield rose to 3.28%, reaching the highest level on record. Meanwhile, the 20-year yield also touched 2.69%, a new high since 1999.

**Persistent US Yield Curve Steepening Pressure**

In the United States, the shape of the Treasury yield curve is becoming a market focus. Analysts believe pressure for curve steepening (where long-term yields rise faster than short-term yields) will persist. Kenneth Crompton, strategist at National Australia Bank, stated:

"Yield curve steepening pressure will remain persistent, with a series of factors continuously adding risk premium to the US curve."

Markets are closely watching Friday's US employment data release. Khoon Goh, Head of Asia Research at Australia & New Zealand Banking Group, analyzed:

"We may see more steepening pressure on the US yield curve, particularly if Friday's non-farm payrolls data is weak and markets begin pricing in more near-term Federal Reserve rate cuts. The UK and Japan may face similar pressures."

**Trade Disputes and Global Market Dynamics**

At the geopolitical and macroeconomic levels, global traders are grappling with a complex array of factors, including key economic data, US tariff policies, Federal Reserve independence, and global fiscal outlooks. Bessent will begin interviews for the Federal Reserve Chair position starting Friday.

Meanwhile, President Trump indicated his administration will request the Supreme Court to make a swift ruling, hoping to overturn a federal court's previous determination that several of his tariffs constitute illegal levies. Additionally, in Australia, the country's second-quarter economic growth accelerated, reinforcing the central bank's rationale for maintaining unchanged rates this month, with Australian bonds also declining accordingly. These factors collectively suggest global equity markets appear to be at a crossroads.