Government bond selloff turns global as Japan's 10-year hits a level unseen since 1996

Methodology note: Morning report, generated before the September 2 US open. Sources cited inline.

The Bond Selloff Is Now Synchronized Across Four Sovereign Markets

Japan's 10-year yield is holding 3%, its highest since 1996, and its five-year is at a record 2.26%. The same move happened overnight in the UK, Germany and the US: 30-year gilts at 5.89%, the highest since May 1998, the 10-year Bund at 3.36%, and the US 10-year at 4.81%, close to a three-year high. On Tuesday the oil shock looked like a US problem: higher inflation, so higher US rates. Overnight it spread. Long-dated government bonds are being sold in all four markets at the same time. A second factor is adding to the selling and has nothing to do with oil. The large AI companies have issued roughly $132 billion of bonds this year, mostly long-dated, and that supply competes with governments for the same buyers. US futures are lower ahead of the 8:15 ADP jobs report.

• JGB 10Y at 3% for the first time since 1996, 5Y at a record 2.26%; 10Y gilts +11bps to 5.25% and 30Y at 5.89%, highest since May 1998; Bund 10Y 3.36%, short maturities at 2008 peaks
• The US 10-year touched 4.81%, highest since November 2023; the 30-year rose 2bps to 5.286%
• US drones struck anchored Iranian government tankers across roughly 100 targets — the first strike on tankers in retaliation rather than blockade enforcement, under a "tanker for tanker" policy
• Iran fired missiles at a US base in Jordan; 10 were intercepted and three landed in remote areas
• Hyperscalers issued roughly $132 billion through July 2026 against $109 billion in all of 2025, weighted to maturities of five years and longer
• Futures put September hike odds above 66%; Kalshi prices a hold at 73% and a hike at 26%

September 2, 2026 Pre-Open

What changed since last report

The point is that four markets moved together. When one country's long-term yields rise, it is usually about that country's borrowing. When Japan, the UK, Germany and the US all rise at once, with Japan and the UK at levels last seen in 1996 and 1998, investors are demanding more to hold long-term bonds anywhere. Two causes are adding together. Oil is the first. Brent has held above $94 through the escalation, which raises inflation expectations and points to tighter policy everywhere. That is why UK and German bonds moved on a US-Iran headline. Bond supply is the second. Hyperscalers have raised roughly $132 billion this year against $109 billion in all of 2025, almost all long-dated, in the same maturities governments need to sell. This is not a fear trade: gold fell 1.86% Tuesday and the dollar barely moved while US drones hit Iranian tankers. Higher yields hurt stocks by lowering the multiple investors will pay, not by cutting earnings, which is why the Nasdaq leads lower.

Tuesday's report set 7,650 as the level where stocks start adjusting, and the S&P closed below it at 7,631.47. That report had the JGB at 3% in its table but focused on oil; overnight made the global bond move the main story. Confirmation is still missing: the 30-year has traded above 5.30% twice and closed there neither time. Base case (55%): the 10-year holds 4.75–4.90%, the 30-year stays under a 5.30% close, the S&P ranges 7,580–7,700 into Friday. Bull (20%): a soft ADP pulls futures toward the prediction-market read, the 10-year returns under 4.70%, the S&P reclaims 7,700. Bear (25%): a 30-year close above 5.30%, or Brent through $100 on a measured export disruption, and the S&P loses 7,550.

Movers

• DELL (+9.1% pre-market): Q2 revenue was a record $47.0 billion, up 58%, with non-GAAP EPS of $7.04 against a $4.87 consensus, full-year revenue guidance raised $25 billion to roughly $192 billion, and AI server backlog at a record $95 billion. It is today's test of whether an AI-infrastructure beat still gets rewarded while rates rise.
• MDB (-13.7% pre-market) and GTLB (+20.6%): both beat, and only one was rewarded. Software stocks are now trading on guidance rather than on the reported quarter, which is the first thing that changes when rates rise.
• BTC ($76,988, -1.6%): opened at $77,395.89 and traded down to $76,597 as the strikes crossed, putting the $76,661 support flagged Tuesday inside the day's range for a second session.
• AVGO: reports Q3 after the close, having guided to roughly $29.4 billion in revenue, up 84% year over year, against consensus of $29.43 billion. It is the largest AI-spending report of the week, and it lands while its customers are borrowing in the same long-dated bond market that is under pressure.
• Energy: the sector holds the only sustained bid of the last four sessions, and it now depends on a supply disruption that has not yet appeared in transit volumes. A confirmed halt in hostilities is what reverses it.

What to watch

The 30-year at 5.30%, third approach. The long bond has traded above the level twice without closing there, settling at 5.286%. What is different now is that the buyers it needs are global: gilts and JGBs are competing for the same long-dated demand, and Treasury's long-dated buybacks do not begin until September 9. A daily close above 5.30% would confirm the break; a close under 5.15% would say the market is already pricing the buybacks.

ADP at 8:15, against a futures-versus-prediction-market gap. Consensus is roughly 47,000 against 44,000 in July, the weakest in six months. Futures price a September hike above 66% and Kalshi prices 26% — a spread that resolves toward one side this week. A print under 30,000 with inflation still elevated is stagflation in its clearest form; above 70,000 settles the gap toward a hike.

Whether "tanker for tanker" reaches export volumes. US drones hit the engine rooms of anchored Iranian government tankers, which targets export capacity directly rather than escort capability. What would turn this from a headline into a real disruption is a drop in Iranian loadings or major operators pausing transits, not the number of strikes. That would put $100 Brent in play; a return under $90 would say the war premium is fading on the same timeline as in July. This resolves in days.