Global bond sell-off continues, Japanese bonds break through the key 3% threshold, ECB rate hike almost certain

⑴ The global sovereign bond sell-off further spread on Tuesday. Japan's 10-year government bond yield broke through the 3% mark for the first time since 1996, the UK's borrowing costs rose to the highest level since 2008, and the US 10-year Treasury yield simultaneously climbed to 4.79%, intensifying the steepness of the overall yield curve.⑵ Eurozone inflation rebounded to 3.3% in August, a significant acceleration from July’s 2.9%, mainly driven by rising energy costs. The data further solidifies market expectations for a European Central Bank rate hike this month, with the move now nearly certain.⑶ According to reports, the US Secretary of the Army resigned due to strained relations with the Secretary of Defense, leaving a vacuum among military leadership and raising market concerns about the continuity of defense policy. Meanwhile, the US and Iran's mine warfare in the Strait of Hormuz has hampered Washington's efforts to control the channel, and the risk of conflict escalation remains unresolved.⑷ The US Treasury Secretary pressured Japan this week, explicitly demanding it to raise rates and end large-scale economic stimulus. This may accelerate Japan’s monetary policy normalization process; combined with domestic inflation pressure, Japanese bond yields still have room to rise going forward.⑸ Upcoming market focus includes the US ISM Manufacturing PMI and job vacancy data. If economic resilience exceeds expectations and next week’s inflation data remains high, the probability of a September rate hike by the Federal Reserve will further increase, making it unlikely for a global bond market respite in the short term.