Investors Bet on Steepening Yield Curves Amid Greenland Tensions, Rising Deficits - US, Germany, Japan

Global bond markets are seeing renewed momentum in steepener trades as geopolitical tensions over Greenland and widening fiscal deficits drive long-term yields higher. The spread between two- and 30-year yields in the U.S. and Germany is at its widest since 2021 and 2019, respectively, while Japan’s gap hit a record high. Shorter-term yields are falling amid expectations of rate cuts due to growth-slowing tariffs, while longer-dated bond yields rise on defense spending and deficit concerns. In Japan, 40-year yields reached record levels after Prime Minister Sanae Takaichi proposed higher spending without funding details. German 30-year yields rose to 3.51%, while two-year notes held near 2.07%. AllianceBernstein’s John Taylor said yield curve steepening is becoming a global trend. Allspring’s Lauren van Biljon expects Japanese rates to rise 75–100 bps further. Some governments, including the UK and Japan, are shortening debt issuance to ease pressure. Nedgroup Investments’ David Roberts warned the selloff may persist and threaten equity markets.