Japanese and German government bond yields climbed sharply on Thursday, with Japan’s 10-year yield reaching its highest level since 2009 amid a broader market sell-off early this week.

What Happened: Germany’s 10-year Bund yield jumped approximately 28 basis points to 2.76%, reaching its highest level since October 2023. This marks the largest sell-off in German government bonds since the months following the Berlin Wall’s fall, driven by expectations of increased spending, according to Trading Economics.

The yield on Japan’s 10-year government bond surged above 1.5% Thursday, tracking a rally in European bond yields after Germany announced plans for a €500 billion ($540.18 billion) infrastructure fund and proposals to overhaul borrowing rules.

In February, Bank of Japan Deputy Governor Shinichi Uchida stated that the central bank would consider further interest rate hikes if economic forecasts are met. Uchida emphasized that Japan’s exit from extensive monetary easing is just beginning, despite already raising rates to a 17-year high of 0.5% in January.

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Why It Matters: Economist Peter Schiff wrote on X, “With German Bund yields moving up too and the dollar falling, Treasuries will have a lot of competition. Rising bond yields will drive the U.S. economy deeper into recession.”

The movements carry significant implications for U.S. investors as Japan shifts away from ultra-loose monetary policy. Since ending its 17-year negative interest rate policy in March 2024, Japan has seen stronger yen and rising yields, prompting Japanese investors to repatriate capital from foreign markets.

U.S. Treasury yields remained near four-month lows on Wednesday, with the 10-year note at 4.23%. The iShares 20+ Year Treasury Bond ETF TLT fell 0.24% amid mixed economic data showing strong services sector growth but weakening employment figures.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.