The bond vigilantes were stalking global debt markets on Thursday, keeping the dollar and stocks subdued too, ahead of a crucial vote in the United States on President Donald Trump's "big beautiful" tax bill.
Caution dominated in Europe after a lacklustre U.S. 20-year bond sale on Wednesday reinforced a "Sell America" narrative already nagging on investors' minds after Moody's last week cut its triple-A credit rating for the United States.
Germany's long-term bond yields hit their highest in two-months as global yield curves steepened.
Britain's government borrowed more than expected in April, figures showed, while euro zone business activity unexpectedly slipped back into contraction territory.
It left stock markets in London, Paris, Milan and Frankfurt all down more than 0.5% EU.. Safe-haven gold rose to a two-week peak while bitcoin jumped to an all-time high, partly as investors sought out alternatives to U.S. assets. EU.
The non-partisan Committee for a Responsible Federal Budget estimates that the U.S. bill, which will extend Trump's signature 2017 tax cuts as well boost military and other spending, will increase the U.S. debt pile by $3.8 trillion over the next decade.
UBS economist Paul Donovan said while the final details were still to be seen, "the broad impact is to push the U.S. further along a rising debt path. Bond investors are less than happy".
The yields on 30-year Treasury bonds - a proxy for super long-term U.S. government borrowing costs - reached 5.108%, its highest since October 2023 and the 20-year yield hit 5.126%, its highest since November that year.
The bond market in Japan has also been in focus given it has the highest debt-to-GDP ratio of any major economy. The 30-year JGB yield hovered at 3.155%, not far from the record high of 3.185% hit in the previous session.
Stocks in Asia also fell after Wall Street tumbled following the tepid debt auction. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab ended 0.6% lower, while Japan's Nikkei (.N225), opens new tab fell 0.8% on a stronger yen.
Source: Reuters
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