A string of poorly received bond auctions in the past week is driving home a message — the Treasuries-led global rout is leaving investors scarred and governments staring at higher borrowing costs.
Treasuries resumed declines Wednesday, sending yields higher across the curve. That follows a disastrous sale of 7-year notes in the U.S. last week, which set the tone for tepid demand for subsequent sovereign bond offerings from Indonesia to Japan and Germany, and prompted other nations to scrap offerings. The push for higher rates comes as central bank policymakers attempt to ease investors' discomfort at the pace of the recent jump in yields.
Investors are demanding higher yields to compensate for the risk of further volatility, which may complicate efforts to finance $14 trillion worth of fiscal stimulus. Concerns that central banks may withdraw policy support has soured sentiment, amid mounting evidence of a faster-than-anticipated economic recovery.
"Investors will be increasingly differentiating countries based on their fundamentals and prospects," said Tuuli McCully, head of Asia-Pacific economics at Scotiabank. "Considering elevated debt levels in some countries, higher funding costs could dampen their economic recovery momentum further."