LONDON/TOKYO/NEW YORK, Sept 4 (Reuters): A sense of calm settled on the world's biggest bond markets on Wednesday, but concerns about the fiscal health of major economies from Japan to Britain and the United States kept long-dated borrowing costs pinned near multi-year highs.
Worries about Japan's fiscal position were revived after Prime Minister Shigeru Ishiba's close aide said he intended to resign from his post, pushing Japan's 30-year government bond yield to a record high well above 3 per cent.
That came a day after borrowing costs, which set the tone for lending rates for corporates and consumers, rose sharply in France and Britain while sterling tumbled, too.
A reshuffle of British Prime Minister Keir Starmer's top team of advisers on Monday renewed the focus on fiscal challenges given Britain's high levels of borrowing and slow growth. In France, Prime Minister Francois Bayrou is expected to lose a September 8 confidence vote he called in an attempt to win backing for an unpopular debt-reduction plan.
"There's a lot of renewed focus globally on the fiscal outlook and this seems to happen every couple of weeks. The UK and France were in focus yesterday," said Zachary Griffiths, head of investment grade and macro strategy at CreditSights in Charlotte, North Carolina.
"But I take comfort in the fact that in the US, the 10-year yield is pretty stable...and that suggests to me that things aren't falling apart. In general, I think the US is actually performing rather well relative to other developed bond markets, at least from the 10-year point of view."
The US Treasury market, considered the bedrock of the global financial system, has also seen pressure from worries about high debt, the impact of tariffs on inflation and concern about the independence of the Federal Reserve.
US 30-year Treasury yields touched the closely-watched 5 per cent level that investors reckon hurts risk assets for the first time since mid-July.
But the long bond yield backed off to trade 7.2 basis points lower on the day at 4.898 per cent after data showed job openings fell in July, reflecting a softening labor market that reinforced expectations of an interest rate cut by the Federal Reserve later this month.
The benchmark US 10-year had risen to a one-week peak on Tuesday, but was down 7 basis points the following day at 4.207 per cent.
Britain's 30-year gilt yields briefly touched their highest since 1998 at around 5.75 per cent and were last down 7 basis points on the day as some stability returned to bond markets.
Speaking to a parliamentary committee on Wednesday, Bank of England chief Andrew Bailey said it was important not to put too much emphasis on 30-year borrowing costs as such long-dated bonds are not currently being used to raise funds.
Euro-area bond yields fell too, although French 30-year borrowing costs held close to their highest levels since 2009 and German equivalents were near 14-year peaks.
"The economic reforms needed to really cover increasing debt are lacking, and the capital market sees that," Deutsche Bank CEO Christian Sewing said at a conference on Wednesday, referring to the selloff in long-dated bonds.
Rising yields are a headache for governments that face higher spending needs and already hefty debt-servicing costs, just as they prepare to issue more bonds and face political obstacles to their efforts to get budget deficits down.
