Core Insights - The global bond market is undergoing a significant adjustment driven by rising fiscal deficits, increasing public debt, persistent inflation, and a shift in investor sentiment towards higher yields [2][3][12] Group 1: Fiscal Deficits and Rising Yields - Fiscal deficits in Europe and the U.S. are expanding, with the U.S. debt-to-GDP ratio expected to rise from under 80% pre-pandemic to nearly 120% by mid-2025 [3] - The U.S. fiscal deficit is projected to remain around 6-7% of GDP even during favorable economic conditions, exerting upward pressure on U.S. Treasury yields [3] - The UK's borrowing needs are anticipated to reach historical highs by early 2025, with long-term bond yields exceeding 5.6%, the highest since 1998 [3] Group 2: Japan's Debt Burden - Japan has the heaviest debt burden, exceeding 250% of GDP, and is adjusting its yield curve control policy due to global pressures, leading to a 30-year bond yield surpassing 3% for the first time [5] Group 3: Inflation and Central Bank Credibility - Persistent inflation is a global driving factor, eroding the real value of fixed-income bonds and prompting investors to demand higher returns to protect their capital [6][7] - Central banks have paused interest rate hikes after aggressive increases in 2022-23, yet bond yields continue to rise due to quantitative tightening [8][9] Group 4: Investor Sentiment and Market Dynamics - Investor psychology has shifted from assuming low yields would persist to a more cautious stance, with "bond vigilantes" re-emerging to enforce fiscal discipline through bond sell-offs [10][11] - The demand for safe-haven bonds has diminished, with investors focusing more on inflation and debt issues rather than seeking safety during global crises [11] Group 5: Structural Reset of the Global Bond Market - The global bond market is experiencing a structural reset, with long-term yields rising across various countries, marking the end of the ultra-low interest rate era [12][13] - Credit ratings reflect disparities among countries, with the U.S. losing its AAA rating and other nations facing similar pressures, leading to increased borrowing costs and fiscal strain [12]