Senior Fellow at the Brookings Institution Robin Brooks warns that while markets focus on falling short-term rates, a “thoroughly alarming” spike in long-term government bond yields is flashing the early warning signs of a potential global debt crisis.
Masking The Danger
According to Brooks’ Substack post, the global economy may be headed into a sovereign debt crisis. He explains that while short-term interest rates have dropped recently due to fears of a U.S. recession, this cyclical decline is masking a structural rot.
Brooks argues that in the aftermath of the “COVID debt binge,” global markets are increasingly reluctant to absorb long-dated government debt.
By stripping out short-term volatility to look at forward yields—specifically what markets expect 10-year yields to be in 10 or 20 years—Brooks reveals a “very scary” picture.
Investors are demanding unprecedented premiums to hold long-term government paper, suggesting that the “economics profession really has no idea” at what point debt becomes truly unsustainable.
A Global Contagion
The analysis highlights that the epicenter of this shift is not the U.S., but the wider G10. Brooks points to Japan, the UK, and France as having “unprecedented” forward yield levels.
In Japan, the 10y20y forward yield has surged to 4.5%, a historic anomaly for the nation.
Similarly, France’s fiscal struggles are reminding investors that Eurozone debt issues “still fester,” causing ripples that even affect traditional safe havens like Germany.
German long-term yields have risen sharply, a behavior uncharacteristic of a market that usually benefits from a flight to safety.
The US Ripple Effect
While the U.S. data appears less severe due to safe-haven inflows, Brooks notes that American Treasury yields are still being “pulled up” by the chaos overseas.
He concludes that while a full-blown crisis depends on policy reactions, the synchronized, global nature of the rise in borrowing costs is “deeply alarming.” Markets, it seems, may have finally decided they have had enough.
As of the publication of this article, the 10-year Treasury bond yielded 4.22%, and the two-year bond was at 3.59%. Meanwhile, the long-term 30-year Treasury yielded 4.84%.
Treasury And Stock Market Performance
According to Yahoo Finance, the market index that tracks the yield on the 10-Year Treasury Note (TNX) has declined 8.14% over the last year and 5.03% over the last six months. Year-to-date, the note has seen a positive change of 1.63%.
Similarly, the longer-term 30-year Treasury (TYX) has seen a decline of 0.08% over the year and 3.47% fall in the last six-months.
Meanwhile, so far in 2026, the Nasdaq 100 index has advanced by 1.28%, whereas the S&P 500 and Dow Jones indices have risen by 1.19% and 2.02%, respectively.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed slightly lower on Friday. The SPY was down 0.084% at $691.66, while the QQQ declined 0.12% to $621.06.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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