G7 government bond yields rose to multi-year highs in August 2026 as rising national debts and increased borrowing costs strained public finances across the bloc. The U.S. national debt exceeded $39 trillion for the first time during this period.

U.S. 30-year Treasury yields rose to their highest level since 2007. German government bond yields also climbed, reaching their highest level since 2011.

Japanese government borrowing costs are near their highest level in three decades. Japan's benchmark 10-year bond yield is approaching 3% for the first time since the mid-1990s.

The term premium across major OECD countries reached its highest level in over 10 years on August 20, 2026. This metric, which compensates investors for the risk of holding longer-term bonds, has increased as market volatility persists. Many G7 governments have increased sales of bonds with shorter maturities in response to these conditions. Traditional investors such as insurers and pension funds have reduced purchases of long-term government debt in Japan and Britain.

Interest payments as a share of economic output have risen in most G7 countries. Across the OECD, interest payments exceeded defense spending in 2024. An independent report commissioned by the French government stated in July that France faces a sharp deterioration in public finances over the rest of the decade unless policymakers curb spending. Italy's sovereign debt risk premium relative to Germany fell to its lowest level since 2008.

Government bond yields across G7 countries increased following the COVID-19 pandemic and Russia's invasion of Ukraine as central banks raised interest rates. The term premium on U.S. Treasuries has increased since the pandemic.

Japan's debt-to-GDP ratio exceeds 200%. Prime Minister Sanae Takaichi leads the Japanese government. Germany's debt-to-GDP ratio is lower than other G7 nations.

Timeline

In 2024, interest payments across OECD countries exceeded defense spending. The U.S. national debt reached $38 trillion in October 2025, followed by an increase to $39 trillion in March 2026.

On August 20, 2026, the term premium across major OECD countries reached its highest level in over 10 years. On the same date, many G7 governments increased sales of bonds with shorter maturities. Also on August 20, 2026, Japanese government borrowing costs were near their highest level in three decades, and Japan's benchmark 10-year bond yield was approaching 3% for the first time since the mid-1990s.

What's New

Additional reporting confirms that the U.S. national debt reached $39 trillion in March 2026. Earlier data shows the U.S. national debt reached $38 trillion in October 2025.

Why It Matters

The rise in G7 bond yields reflects a structural shift in global finance where debt service costs are consuming a larger share of national budgets. With interest payments exceeding defense spending across the OECD in 2024, governments face difficult choices between cutting expenditures and managing debt loads.

Market behavior indicates a changing landscape for sovereign debt, as traditional buyers like pension funds reduce their exposure to long-term bonds. This reduction in demand, combined with increased issuance of short-term debt by governments, creates a more volatile environment for public finances across the bloc.