Bond markets worldwide have been pressured for months, sending yields to multi-decade highs as the Iran war raised energy prices and as investors fret about government spending. To complicate things further, central banks are raising their interest rates as well.

High yields mean bond prices are falling.

The United States, known for possessing the world’s deepest and most influential government bond market, is witnessing a massive selloff. The yield on 30-year Treasury bonds climbed to 5.48%, highest since 2004, on Thursday, while the benchmark US 10-year yield reached 5.20%.

To date, investors have absorbed the rise in yields given the resilience of underlying economic growth, booming corporate profits, and increasing spending, led by ⁠the AI boom.

The 10-year Treasury yield breached the 5% mark in September. Investors are now preparing themselves to see the ratio crossing the 6% milestone, which could increase the pain further for the global financial markets and corporate America.

Breaching the 6% milestone will only result in elevated borrowing costs squeezing consumers ahead of the midterm elections.

In the world’s largest economy, 30-year mortgage rates are now a percentage point higher than before the Iran war and, at 7%, are around their highest in two years.

The 10-year yield has risen 0.70 percentage points since the Federal Reserve policy meeting in June and 1.25 percentage points since early March.

“The vast majority of the move higher in yields since March has been driven by rising Fed expectations, with the remainder driven by a combination of rising growth expectations and higher oil prices,” said Gennadiy Goldberg, head of US rates strategy at TD Securities, in a research note.

Recent business activity data indicating strong US growth and rising inflation pressures has raised the chances of the Kevin Warsh-led Federal Reserve possibly hiking rates further.

While ‌shorter-dated Treasury ⁠yields track expectations for interest rates, the 30-year yield reflects investors’ willingness to finance government borrowing in the years ahead.

Along with the United States, the major global economies are grappling with higher interest payments as well, with spending and lending demands surging steadily at the government, business, and household levels.

Germany’s finance agency now expects federal borrowing to ⁠hit a record 525.5 billion euro (USD 598 billion) in 2026 and to rise further in 2027, driven largely by rising refinancing needs and growing requirements for special funds.

The yield on Germany’s benchmark 10-year Bund briefly rose above 3.6% in September, its highest level in 17 years.

Japan’s 10-year bond yield on Thursday hit its highest since 1996.

US Treasury Secretary Scott Bessent has remained proactive in containing rising borrowing costs.

Not only did he intervene to buy the yen to avoid officials in Tokyo selling US Treasury bonds, the Donald Trump administration official also expanded buybacks of 20- and 30-year debt.

However, these measures have proven mostly ineffective, as yields ⁠have continued to climb.

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Companies with payrolls above £3 million have been paying into the scheme since its launch in April 2017 and continue to do so monthly. They can get the money back if they invest it in apprenticeship programmes with approved providers such as DTL, but there is a two-year deadline.

That means in April this year, levy payments dating back to the start of the scheme will go to the Treasury, and funds will continue to be funnelled away each month on the second anniversary of when they were paid in. So, for example, the levy payments that companies made in September 2017 will no longer be available to invest in apprenticeship programmes from September 2019.

The levy was supposed to encourage firms to invest in apprenticeships but confusion and concerns about costs meant the scheme initially had the opposite effect.

DTL hosted an Industry Skills Forum in late 2017 for leading figures in HR in construction and the utilities that highlighted wildly varying views on the levy, from companies that were embracing it to train new and existing employees to those who saw it as a tax.

Since then the government has tweaked the scheme significantly, reducing the amount of levy payments and allowing smaller companies to use levy money to help other organisations finance their own apprenticeship training, typically those in the big companies’ supply chains.

Now, despite wider political and economic uncertainty, DTL hopes 2019 could still be the year that kick starts the faltering programme. The training company has campaigned vociferously for businesses and government to invest in training in the construction and utility sectors to address the massive skills shortage faced by the industry.

Whether by using levy-funded apprenticeships or by investing directly in learning and development, DTL is urging companies heading for the looming levy deadline to meet the challenge and ensure Britain has the workforce it needs to keep the country’s infrastructure and building projects running into the future.

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President Donald Trump had urged China to offer more at the bargaining table as the two countries prepared for their first major negotiation in more than two months– in an effort to avoid an all-out trade war.

“We’re talking to China, they very much want to talk,” Trump stated Thursday at a cabinet meeting at the White House. “They just are not able to give us an agreement that is acceptable, so we’re not going to do any deal until we get one that’s fair to our country.”

“It’s a good thing that they’re sending a delegation here — we haven’t had that in quite some time,” told Larry Kudlow, National Economic Council Director to the CNBC on Thursday.

“The Chinese government in its totality must not underestimate President Trump’s toughness and willingness to continue this battle to eliminate tariffs and non-tariff barriers and quotas to stop the theft of intellectual property and to stop the forced transfer of technology.” He added.

Kudlow further said the Chinese economy and currency “are slipping, as you all know, but let’s just see what happens.” He emphasised that discussions tend to produce better outcomes than expected—and that talking was always a better option.

This will be fourth round of formal talks since trade tensions flared this year, but the first session since early June.

“This will be ‘talks about trade talks,’” said Gai Xinzhe, an analyst at the Bank of China’s Institute of International Finance in Beijing. “Lower-level officials will meet and haggle and see if there is a possibility for higher-level talks.”

To restart trade negotiations with the U.S., China must offer a package of measures, according to Jacob Parker, the vice president for China operations for the U.S.-China Business Council in Beijing.

He stated that China needs to make a better offer that slashes the bilateral trade surplus, lowers import tariffs, provides better protection for intellectual property and stop forced technology transfers.

The two nations had seemingly appeared to have reached a deal in May after Chinese Vice Premier Liu He — President Xi Jinping’s top economic adviser — led a group of officials to Washington. But Trump backed away from the agreement soon afterward, and ever since the two sides have been locked in a standoff as they slapped tariffs on billions of dollars of each other’s goods.

The Trump administration already imposed duties on $34 bn of Chinese goods last month, a move that prompted immediate retaliation from Beijing. Levies on another $16 bn in goods take effect August 23.

The U.S. Trade Representative’s office stated on Thursday it had extended its public hearings on its proposal to impose tariffs on $200 bn of Chinese goods to six days starting August 20, from four days initially.

As many as 370 people are expected to testify. The tariffs that China has vowed to retaliate against by levying duties on $60 bn of U.S. goods, can take effect after a public comment period closes on September 6.

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First, the Chancellor and The Treasury are failing to embrace fully the opportunities Brexit could bring. Philip Hammond began his speech by mentioning there were opportunities from Brexit. But then he failed to spell them out. He and The Treasury still convey the image of making the best of a bad job. I would like to have heard far more about the vision that lies ahead. Admittedly the Chancellor is putting an extra £3 billion aside to prepare for Brexit. This should have been done sooner and is on top of £700 million already spent.

Second, the independent Office for Budget and Responsibility (OBR), who provide the economic forecasts, now believe the UK is a low growth economy. This is not because of Brexit but because of low productivity growth since the 2008 financial crisis. They are catching up with the Bank of England, who have been cutting their forecast steadily over much of the last decade. This year the economy looks set to grow at 1.5%, which is lower than expected back in the spring, but far higher than most forecast immediately after last year’s referendum. The economy is expected to grow only 1.4% next year and 1.3% in 2019.

Trouble is the OBR may be becoming too pessimistic at just the wrong time. Inflation is forecast to peak this quarter and fall next year. That should help consumer spending, particularly if wage growth picks up, as seems likely.
Also, with the world economy growing more strongly, UK exports should grow too, helped by the competitive pound. Much will also depend on businesses and whether they will invest over the next year or so.

Third, the budget confirmed that the Conservatives have abandoned austerity as the way to reduce the budget deficit. The Chancellor announced a large £25 billion boost over the remainder of this and the next five fiscal years. The bulk of that is increased spending. So instead of cutting taxes further, or getting rid of the deficit sooner, the government has opted to boost spending. The budget included 69 new spending or tax measures, which suggests far too much micro-managing.

Fourth, we also need an enabling environment for businesses to grow. On that front there was some good news yesterday for small firms, including a welcome cut in business rates. I was critical of previous austerity measures, arguing that the government should be borrowing more to invest. This has started to happen in recent years and yesterday we saw more of this, which is welcome.

Fifth, housing was the centre piece of the budget. The good news was the Chancellor stressed that this was about building more homes, including easing planning restrictions. In that respect, the measures he announced were welcome, but maybe more speed is needed as we will have to wait until the middle of next decade to achieve 300,000 extra homes per year. Stamp duty is a bad way to tax housing, as it discourages turnover, but surely cutting stamp duty for first-time buyers will just force up the seller’s price. More supply is needed, soon.

Sixth, the economy faces long-term challenges. It is only when productivity is higher that wages can start to rise. In my view, low productivity is explained by the four ‘I’s: investment, innovation, infrastructure and inclusive growth. We need more of each of these. The budget announced some measures.
On the innovation front, the Chancellor was right to help the UK take a lead role in the new technology revolution.
On inclusive growth, the good news was help to the regions and more cities, and a much needed £1.5 billion to ensure better delivery of universal credit. Helping more people back to work is key. Raising personal tax allowances further was also a welcome measure. Now we need wages to rise.

Gerard Lyons, Chief Economic Strategist, Netwealth Investments

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Suparna Goswami Bhattacharya

September 08, 2016: Post-sanctions, things are not exactly smooth for Iran. Many international banks are not letting their customers carry out transactions with Iran.

Recently, ANZ bank refused its customers transactions with Iran fearing a backlash from the US treasury. Though Australia has dropped trade sanctions with Iran, the US has not. On contacting ANZ, the bank issued the following statement: “While there has been a lifting of some sanctions to Iran by Australian authorities, as an international bank we continue to comply with the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which bans transactions to and from Iran.”

Maryam Taghavi, senior consultant, Atieh Bahar Consulting, a member of Atieh Bahar Group of Companies, says, “Iran has already considered trading in foreign currencies. Iran is trying to do everything possible to makes things easy for foreign businessmen. However, there is still a fear, especially among Level 1 and Level 2 banks, of a US backlash.”

Taghavi adds that 200 individuals/items continue to be part of the sanctions list, down from 600 in January. Though non-US banks are not part of the list, there is still a lot of confusion.

M Ali Altundal from Altundal Consultants, says, “Every day we receive queries on ‘what happens in case of US backlash’ or ‘how do we address an issue if Iran violates a rule’. Though we try to explain in detail to them about the various solutions, I can see they are sceptical.”

Taghavi adds that under Joint Comprehensive Plan of Action (JCPOA), a dispute resolution committee has been set up for companies to address their concerns in case of any violation or a backlash. However, either many are not aware of this or are not ready to trust the committee.

European banks are wary of conducting business in Iran because they are afraid of running afoul of those sanctions by inadvertently conducting transactions in US dollars, which is still banned under US law, or through an American office. They also fear what might happen if Republican presidential candidate Donald Trump wins and tears up the plan of action, as he has promised to.

A Clyde & Co survey found that a quarter of British-based senior executives of businesses interested in Iran listed US sanctions as their top concern, followed by an unwillingness among banks to extend credit for ventures in Iran and insurance companies’ reluctance to insure those ventures — problems that could be traced back to US sanctions.

However, small banks, who do little or no business with the US, are entering Iran. The Central Bank of Iran has said some 200 small banks have started correspondent relationship with Iranian banks.

How transactions get complicated

A statement by US Treasury says Iran-related transactions must not ‘transit’ the US financial system. Though it sounds simple but in reality can be confusing and complex.

Consider this. A German mining company wins a bid for a project in Iran. The government of Iran plans to make payments to the German company’s account in a French bank. The payments will come from the Iranian government’s account in Dubai and will be made in Euros.

The above transaction has no problems since it does not involve any US person or US financial system. However, consider the next step.

In an unrelated transaction, the German mining company wishes to pay for some services in US dollars using money in its account at the French bank, at least some of which was funded via the Euro payments from Iran. In this transaction, the French bank will likely use a US correspondent bank to make the US dollar transfer. This is where the confusion starts.

The French bank has reasons to know it is sending money in US dollars through an Iran-related transaction, and thus violating rules. This is what complicates transactions with Iran.

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Peter Taberner

May 18, 2015: Britain is still raising its eyebrows, after David Cameron’s Conservative Party won an outright majority in the general election, after five years in Downing Street as part of a coalition government.

It was a surprising result which confounded all the pre-election opinion polls, which placed the Conservatives and the opposition Labour Party neck and neck, even on polling day itself.

Eventually, the Conservatives won 331 parliamentary seats, an increase of 24 after their vote share had risen by 0.8%. It was the first time they won a majority in 23 years.

This is the first time since Margaret Thatcher’s government in 1983 that a ruling administration had increased its tally of seats in an election.

Cameron’s victory was achieved due to many factors. In Scotland, the Scottish National Party swept the board, in a wave of nationalism that skewed Labour, leaving them with just one seat in one of their traditional heartlands.

Labour’s now former leader Ed Miliband had never convinced the electorate of his ability to govern.

His campaign lurched leftwards, failing to capture the centre ground, in addition to the losses in Scotland. This left Labour being whittled down to 232 seats. Far fewer than predicted.

The Conservatives’ former coalition partners the Liberal Democrats also suffered a chastening night, losing 49 seats, and now have just eight members of parliament, forcing Nick Clegg to resign as deputy prime minister.

There was little doubt that the markets were ebullient in seeing clear victory, as opposed to a hung parliament.

The pound fell to a pre-election nadir of £1.51 to the US dollar, before skyrocketing to a six month high of just under £1.58, once the results came through.

In a similar pattern, the FTSE 100 index crashed to 6,886.9500 on election day, bouncing back up to 7,046.800 24 hours later, when the country woke up to a Conservative government.

Cameron quickly assembled his new cabinet team. Unsurprisingly, his chief lieutenant George Osborne remains as the chancellor, and Theresa May will carry on in the Home Office. Phillip Hammond will also continue as foreign secretary.

Significantly, Sajid Javid has been appointed as the new business secretary, in a move that has been warmly received by the business community, as he has a perceived good record in his previous position as treasury minister.

The Confederation of British Industries (CBI), which has 190,000 members and covers sectors in the UK economy from construction to the financial services, is pleased to see a decisive victory.

“There will be hurdles to overcome for the new government though with a slim majority, but it must not duck the tough decisions needed to keep growth striding ahead,” a CBI spokesperson said.

“The general election result in Scotland has also been conclusive. Firms will be looking forward to working with the SNP, to drive the jobs and growth we all want to see across the nation.”

The spokesperson added: “Nicola Sturgeon has made clear that this election was not about independence or another referendum, which business will be heartened to hear.”

“Firms will now be looking for the devolution proposals, which were agreed by all parties in the draft Scotland Bill to be in the Queen’s speech.”

With an EU referendum likely to be held sooner than the original plan to hold the vote in 2017, the CBI say that they want to see an ambitious reform agenda, to make the UK and Europe more competitive.

They believe the majority of businesses want to stay in a reformed European Union, which opens up the world’s largest market of 500 million consumers.

In response to the election, the CBI has launched a business plan, for the first hundred days in office for the new Conservative government.

For medium sized business, they say a healthy financial sector is necessary, to help businesses grow.

Fresh ranges of financing should be made available, unlocking wholesale funding, such as private placements, and measures should be in place to boost the take-up of equity finance.

Government finance options should be made more visible, with the British Business Bank becoming a ‘one stop shop’ for businesses.

The CBI believes that the right balance is also need to be created on regulation. It recommends continuing the current “one in, two out” approach adopted by the government to business guidelines.

Work should also begin on a Business Tax Roadmap, to design a bespoke tax on business framework.

The roadmap would update the current broken business rates system, the CBI says.

And ministers should also continue to adhere to the most competitive corporation tax regime in the G20, to advertise that the UK is business friendly.

Aggressive tax evasion must be hunted down by the government, where structures must be in place to tackle abusive tax arrangements, and guide businesses through the complex tax system.

Also, a comprehensive spending review ought to be initiated, with the view to pinpoint public spending cost reductions, in tandem with innovation and investment. All part of a process to cut the UK’s large deficit.

Danny Cox, Chartered Financial Planner, Hargreaves Lansdown, reflected: “We are pleased that the result is clear, as stability is best for investors, business and markets. The Conservatives are committed to an EU referendum which will inevitably lead to uncertainty so they should get on with it; accelerate the timetable to minimise what could be a considerable distraction for investors, business and politicians.”

The financial giants have highlighted many areas, where the government should get to work.

A new ministerial position should be created, with a savings and investment minister appointed.

There is a lack of political representation or coherent policy for savers, despite businesses relying in investments from pension funds and other investment avenues.

Hargreaves Lansdowne’s view includes extending Help-to-Buy for first-time home buyers, and have flexible Independent Savings Accounts extended to stocks and shares.

Retail investors should participate in taxpayer owned institutions, such as the sales of state owned shares in banks.

There should also be programmes to increase participation in private pensions, especially for the self-employed.

Increase contribution rates into workplace pensions, also ensuring that pension savers can enjoy a balanced tax system, to incentivise everyone to save for retirement, regardless of earnings.

Cameron’s personal ratings have always been higher than his party’s, but so far he has not been a prime minister that has been central to the fabric of British public life.

Certainly not in the way that recent titanic figures, like Margaret Thatcher and Tony Blair have been.

This now may change, as at the second time of asking, he has his moment.

Earlier Report:

Uncertainty of election makes pound jittery

Argentina sues and suspends Citibank

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