DBDaily: Global bond sell off as inflation concerns intensify

Research evidence excerpt

DBDaily: Global bond sell off as inflation concerns intensify

Deutsche Bank

Research

Economics Date

DBDaily 18 May 2026

Global bond sell off as inflation concerns

Phil Odonaghoe intensify

Economist

+61-2-8258-1606

Japanese investors have switched to buying bonds and selling equities; Flash

PMIs due this week

US equities were weaker Friday, S&P down 1.2%, NASDAQ down 1.5%. Oil up

3.3% to USD109.26/bbl (Brent). US10yr yields up 11bps to 4.59%, highest close

since 21 May 2025, US30yr yields lifted to 5.1%, highest close since July 2007.

Global bond yields also moved higher: UK10yr yields up 18bps to 5.17%, highest

since June 2008, German 10yrs up 12bps, Japan up 9bps to 2.70%. Japanese

30yr yields lifted 14bps, closing above 4% for the first time on record. The moves

come after the stronger inflation reports in the US last week, and as the China-US

summit yielded no breakthroughs on the Strait of Hormuz.

Also helping the inflationary concerns behind the bond sell-off: Japan producer

prices much stronger than expected, (in fact largest beat on record) up 2.3%mom

in April, consensus at 0.8%mom. March revised up to 1.0%mom, from 0.8%

initially reported.

US industrial production beat, up 0.7%mom in April, consensus at 0.3%. US

Empire state manufacturing beat as well, up ~9pts to 19.6 in May, consensus

looked for a 4pt decline. In the details, in increases in prices paid and received

adding to inflationary concerns.

Parag Thatte notes that overall equity positioning is not elevated (69th

percentile), but it is considerably higher in large caps (91st percentile) and

especially in large-cap Tech (95th percentile).

Steven Zeng notes some interesting developments in the latest MoF data for

Japan. In the final week of April and the first week of May, Japanese investors