Global Bond Yields Plunge as Investors Flee Equities Amid Market Turmoil

LONDON – Bond yields across major economies sank on Monday as investors sought refuge in government debt, following a sharp global equity selloff triggered by rising fears over U.S. trade policy and an increasingly uncertain macroeconomic outlook.

The flight to safety comes on the heels of last week’s announcement by U.S. President Donald Trump introducing a fresh wave of tariffs, sparking concern over potential repercussions on global trade and economic growth.

Bunds Lead Global Rally

Germany’s 10-year bund yield — the benchmark for the eurozone — fell significantly, dropping from 2.72% last Wednesday to 2.59% by Monday afternoon. The decline underscores heightened demand for low-risk assets, reversing a previous trend that had pushed yields past 2.9% on expectations of increased fiscal spending in Germany.

“The Bund rally is unwinding the region-wide tightening of financial conditions,” analysts at Rabobank noted on Monday.

They added that any reversal in tariff policy by the Trump administration would offer only temporary relief, warning: “Such a move would underline the unpredictability of the current policy environment, which, itself, is a negative for confidence and risk appetite.”

Treasury Yields Dive in U.S.

Across the Atlantic, U.S. Treasury yields also came under pressure. The yield on the 2-year Treasury note fell to around 3.58%, marking its lowest level since September 2022. Although the 10-year yield steadied, it remained below the critical 4% threshold, a level not breached since October 2024.

Market analysts interpreted the yield drop as a growing signal of recessionary risks being priced into the bond markets.

“Banks are seen as barometers for economic health, and given the steep losses, red lights are flashing about a looming global recession,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “These warnings are also showing up in the bond markets.”

Asian Markets Join the Bond Surge

In Asia, bond yields mirrored the global trend. Japan’s 10-year government bond yield hit a three-month low after recording its steepest weekly drop since 1998, according to Deutsche Bank economists.

The synchronized global rally in bonds is driven by a combination of factors, including fears over the trade war’s impact on global growth, potential recession in the U.S., and speculation about future moves by central banks.

Outlook Remains Uncertain Despite Rally

Despite the current strength of the bond rally, some strategists cautioned that the trend might not last.

“This is the first time bonds have rallied properly after a long bear market since 2021,” said George Lagarias, chief economist at Forvis Mazars. “But there are reasons to be cautious.”

Lagarias highlighted ongoing inflation risks in the U.S., the possibility of banks offloading bonds from 'held-to-maturity' portfolios, and potential central bank interventions as factors that could reverse the bond market momentum.

“Events are very news-driven right now,” he added. “Within a week, things could change dramatically. Inflation is still there. Do you want to be in bonds long-term if you fear inflation in the U.S.?”

Lagarias also pointed to the possibility of central banks stepping in with verbal assurances, credit facilities, bond purchases, or rate cuts — all of which could act as market-moving catalysts.

Conclusion

As volatility continues to grip financial markets, the bond rally reflects investors’ growing unease about policy direction, economic stability, and inflation trajectories. Whether the current momentum in safe-haven assets can be sustained will largely depend on upcoming geopolitical developments and central bank signals in the weeks ahead.