Rolling coverage of the latest economic and financial news, as rising oil price sours sentiment in the markets and drive up bond yieldsJapan’s bond prices have been hit by the prospect of a debt-fuelled energy support package.Today, prime minister Sanae Takaichi said she had told finance minister Satsuki Katayama last week to start work on compiling a supplementary budget, which could cushion the impact of the Middle East conflict on Japan’s economy.“Government bond yields are rising across the US, UK, Europe and Japan as investors reassess inflation risks, higher energy prices, political uncertainty and growing fiscal pressure. The move higher in yields suggests markets are increasingly accepting a ‘higher-for-longer’ interest rate environment. “The concern for investors is that higher yields do not stay confined to bond markets. They can weigh on equity valuations, particularly in growth and technology sectors, while also increasing pressure on governments carrying large debt burdens. “Markets are also becoming more sensitive to geopolitical risks. Rising oil prices and fears of disruption around the Strait of Hormuz are reviving inflation concerns at a time when many central banks were hoping price pressures would continue easing. “For now, bond markets appear to be signalling that investors should prepare for a more volatile environment where higher borrowing costs remain a key market theme well into the second half of the year”. Continue reading...

Source: https://www.theguardian.com/business/live/2026/may/18/bond-market-rout-inflation-fears-gilts-yields-burnham-imf-reeves-live-updates