World’s Long-Dated Bonds Face a Traditionally Terrible Month

(Bloomberg) -- Longer-maturity bonds may be in for a treacherous September, if history is any guide.

Over the last decade, government bonds globally with maturities of over 10 years posted a median loss of 2% in September, according to data compiled by Bloomberg. That’s the worst monthly performance of the year.

Most Read from Bloomberg

Sydney’s New Airport Will Take Travelers Into the Wild One of World’s Most Liveable Cities Ends Euro-a-Day Travel Pass Amtrak Debuts New High-Speed Acela Trains After Years of Delays Trump Signs Order to ‘Make Federal Architecture Beautiful Again’ Parents Mobilize to Protect School Commutes Amid Trump Deployment in DC

That trend will worry bond investors, with the longest-dated debt already lagging behind shorter maturities this year on concern governments will ramp up borrowing to fund spending pledges. What could worsen it is sticky inflation in Japan, political turmoil in France, and speculation that US President Donald Trump may push the Federal Reserve to cut interest rates, amplifying price pressures stateside.

“The market right now feels downright unpleasant,” said Hideo Shimomura, senior portfolio manager at Fivestar Asset Management Co. in Tokyo. “September is often when monetary policy takes a sharp turn,” and a month when positioning in anticipation of moves often shows up, he said.

The vulnerability of long-dated government debt reflects years of heavy issuance to fund public spending, exacerbating budget deficits. The concerns are particularly acute in the US, where Trump’s tax-cut and spending bill is forecast to add $3.4 trillion to deficits over the long-term, as well as in the UK and France.

Long-dated bonds were under pressure again Tuesday. The US 30-year yield rose to near 5%, while its UK peer hit the highest since 1998. The equivalent rate on French notes rose six basis points to 4.51%.

“Even in orderly markets, we’re seeing a slow-moving vicious circle: rising debt concerns push yields higher, worsening debt dynamics, which in turn push yields higher again,” Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG, wrote in a note.

European Central Bank policymaker Isabel Schnabel told Reuters in an interview that borrowing costs globally may start to be lifted sooner than anticipated, citing high government spending as one of the main reasons.

Near-Term Hurdles

US payrolls data on Friday poses a near-term risk for the market as traders wait to confirm bets on a Fed rate cut this month. Euro-zone inflation data is also on traders’ radar as they watch for any potential surprise, with policymakers widely seen keeping rates steady next week.

Story Continues

Meanwhile, France is in an acute political crisis that has pushed yields there higher, with Prime Minister Francois Bayrou seeking support for a Sept. 8 confidence vote. He’s aiming to get backing for a 2026 budget that includes significant spending cuts, which he argues are essential to narrow the deficit to 4.6% of economic output from an expected 5.4% this year.

Some like Chris Weston, head of research at Pepperstone Group, cite the typical September pickup in issuance for the seasonal slump in long-end bonds. Mohit Kumar, chief European strategist at Jefferies International, concurs.

The September seasonality is “mostly issuance related,” said Kumar. “We don’t have a lot of issuance during July and August and then not much post-mid November.”

Adding to the supply overall is a busy corporate bond pipeline, with high-grade sales in the US expected to amount to $55 billion this week.

Japan’s 30-year bond sale later this week will be closely watched by investors. They are keen to gauge demand for the nation’s debt amid questions over Prime Minister Shigeru Ishiba’s leadership and expectations for Bank of Japan rate hikes.

Globally, returns on ultra-long bonds have fallen 2.6% since June 30, putting them on track for their first quarterly decline of 2025. They’ve trimmed year-to-date gains to 3.5%, while shorter-dated notes are up 7.9% over the same period.

For Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc in London, stronger-than-expected US data and a potential hawkish pivot by the BOJ are among catalysts that could worsen this month for bonds.

There are “a lot of risks to navigate,” she said.

(Updates prices, adds additional context, comments.)

Most Read from Bloomberg Businessweek

Silicon Valley’s Drive to Get AI Into America’s Schools Is Working Monchhichi Makes a Comeback Amid Labubu Craze Young European Backpackers Are Being Lured to Australia for Mining Jobs As Bushmeat Consumption Grows, Nigerian Doctors Fear Outbreaks How Bombas Built a Fancy Socks Empire With $500 Million in Sales

©2025 Bloomberg L.P.

View Comments