Bond Markets Warn: Cheap Financing Is Gone for Good

Global bond markets are signaling that the era of cheaply financed government spending is ending as higher deficits, supply shocks, and AI-related investment push up inflation and long-term yields. In the near term, borrowing costs rise for U.S. homebuyers and companies; globally, yields in Japan and the UK have hit multi-year highs. Investors face dual risks: inflation eroding returns and rates moving higher in the future. Policymakers must choose between relief that could lift rates further and the need to curb inflation, marking a stark shift from the “free lunch” era of financing.