When we wrote about the national debt hitting $40 trillion, the warning wasn’t that some number on a screen was going to blow up the economy on a Tuesday afternoon. The warning was that we keep piling debt onto a system that is already under real strain, and eventually the people who buy that debt start demanding to be paid more for the risk.
That is exactly what happened this week.
Government borrowing costs just spiked in every major economy at the same time.
Japan. Britain. Germany. France. The United States. Not one country in trouble. All of them, on the same day.
Most people won’t hear about it, because bond markets don’t make good television. Stocks are the scoreboard everybody watches. Bonds are the plumbing underneath the house. And the plumbing is making noise right now.
Are these warning signs pointing to bigger problems on the horizon?
Here are the numbers, according to CNBC’s market coverage and reporting from The New York Times:
- The U.S. 10-year Treasury yield climbed to roughly 4.79%, a 20-month high. The 30-year is still sitting near a two-decade high.
- Japan’s 10-year government bond crossed 3.00% for the first time since 1996. Their 2-year hit 1.81%, a 31-year high. Japan spent thirty years at effectively zero. That era is over.
- U.K. 10-year Gilts jumped to about 5.23%, the highest since June 2008, right in the teeth of the financial crisis. The 30-year Gilt hit roughly 5.89%, a level last seen in March 1998.
- German 10-year bunds rose to about 3.35%, a fresh 52-week high and, per the Times, levels last seen in 2011. France’s 2-year hit its highest since April 2024.
Peter Schaffrik, a strategist at RBC Capital Markets in London, gave the Times four words that sum it up: “It’s a global story.”
That is the part that should get your attention. One country with a debt problem is a country problem. Every developed economy repricing its debt in the same week is a system problem.
The Bond Market Matters More to You Than the Stock Market Does
A lot of people tune this stuff out because they figure it only affects people with brokerage accounts.
Wrong.
The 10-year Treasury is the reference rate for the entire American economy. When it goes up, your 30-year mortgage rate goes up with it. So do car loans, credit cards, home equity lines and every small business line of credit in the country.
It also determines what Washington pays to service the debt. We are past $40 trillion, more than 120% of the size of the economy. Every point of interest on that pile has to come out of taxes, spending cuts, or more borrowing. Nobody in either party is seriously proposing the first two.
And it’s the mechanism that turns a bond move into a stock crash. When boring government paper pays 5% with no risk, the math that justified paying forty times earnings for a tech stock stops working. That isn’t a theory. That’s arithmetic.
I’m not going to sell you a panic, because the honest data cuts both ways.
Carson Group strategist Ryan Detrick put together a set covering more than three dozen geopolitical shocks going back to 1940. Wars, invasions, assassinations, terror attacks. Roughly two-thirds of the time, the S&P 500 was higher twelve months later. The average gain was about 3%.
Markets absorb bad news. They’ve been doing it for eighty-five years.
But go look at the events that lost money, and they share one thing. The thing we have right now.
Energy supply disruption.
In October 1956, Britain, France and Israel invaded Egypt over the Suez Canal, choking off Middle East oil headed to Western Europe. The S&P 500 was down nearly 12% a year later.
The Arab oil embargo of 1973 was worse. OPEC members cut off the U.S. and other allies of Israel, and the S&P lost 35% over the following year.
Now compare that to what we’re living through. The Iran war is six months old. The Strait of Hormuz has been closed to virtually all maritime traffic since Iran shut it, halting roughly 20 million barrels a day, about a fifth of the world’s petroleum liquids.
That is a bigger disruption than Suez. That is a bigger disruption than 1973.
That is not a prediction. It’s a comparison. And it is not a comparison that favors us.
Look at the Diesel Number, Not the Crude Number
Brent crude was above $92 on Tuesday, up more than 2% on the day and roughly 30% above prewar levels. West Texas Intermediate was around $88.
But crude isn’t the number that should worry you. Refined fuels have climbed even faster than crude. Diesel is the one that matters, because diesel is embedded in the price of every single thing that moves on a truck, which is every single thing you buy.
Here’s the proof that it has already spread. Core PCE inflation, the measure that specifically strips out food and energy so economists can see whether a price shock has leaked into the rest of the economy, has been stuck around 3.3% to 3.4% for months.
Read that again. The measure designed to ignore energy prices is elevated anyway.
As we’ve been warning, the real energy problem isn’t necessarily crude oil itself. It’s the growing squeeze on refined fuels like diesel and gasoline.
Shipments out of the Gulf have fallen amid disruptions around the Strait of Hormuz, while Ukrainian drone attacks have damaged Russian refineries and energy infrastructure. Goldman Sachs now says diesel is at the center of the supply crunch, with global refinery runs estimated to be about 7 million barrels per day below last year.
That’s the problem: crude oil can still be available, but if refineries can’t turn enough of it into diesel, gasoline and jet fuel, shortages and higher prices can still hit consumers hard.
Diesel is especially important because it powers trucking, agriculture, construction and much of the machinery that keeps the economy moving. Any prolonged shortage quickly works its way into food, shipping and consumer prices.
That means businesses are eating higher production and freight costs and passing them straight through to you.
Nobody in Charge Has a Plan, and Investors Have Figured That Out
The debt levels alone aren’t what’s driving this. It’s the growing sense that no government anywhere intends to do anything about them.
France now carries public debt north of €3.5 trillion, about 117% of its economy, heading into a presidential election where none of the front-runners has offered a plan investors find believable. French bonds this summer started yielding more than Italian bonds. Ten years ago that would have been unthinkable.
Japan’s debt is more than twice the size of its economy and Tokyo is still spending.
Treasury Secretary Scott Bessent went on CNBC from the G20 meetings and shrugged the whole thing off, calling the U.S. bond market the best performing in the world and pointing to Fitch reaffirming its AA+ rating last month.
Steve Englander at Standard Chartered wasn’t buying it. He noted a Supreme Court tariff ruling stripped out roughly 40% of the additional tariff revenue Washington was counting on, and told CNBC that “Everybody has a deficit problem.”
Being the least ugly house on a burning street is not the same thing as being fine.
The AI Borrowing Binge Is Making It Worse
This is the piece almost nobody is connecting, and it may end up mattering most.
Technology companies have issued billions in bonds to fund the AI buildout, and all of that paper is competing for the same pool of investor money that governments need. When the private sector floods the market, governments have to pay up to place their own debt.
We covered the leverage stacking up underneath that buildout in Nvidia Is Now Backstopping $230 Billion of the AI Boom. The bond market is now where the AI debt story and the sovereign debt story run into each other.
So Where Does That Leave Us
Nobody can tell you a crash is coming next Tuesday, and anybody who does is selling something.
What I can tell you is that we are looking at the largest energy supply disruption in modern history, inflation that has stopped falling, debt levels that leave governments no room to respond, and a bond market repricing the entire developed world in the same week.
None of that guarantees a collapse.
But Schaffrik made a point to the Times worth sitting with. If politicians won’t discipline themselves, the bond market eventually does it for them. That process has never once been gentle, and it does not wait for a convenient moment on the calendar.
At some point you stop asking whether any single indicator proves we’re in trouble and start looking at the whole damn picture.
Get Your Economic Preparedness Squared Away Now
The moves that make sense here are the same ones that made sense six months ago, and they’re a lot cheaper to make while everything still functions normally.
Attack your variable-rate debt first. Credit cards, HELOCs, adjustable mortgages, business credit lines. In a rising-rate environment those get worse automatically while you sleep. Low fixed-rate debt is the opposite, and in an inflation it works in your favor.
Build cash reserves, and keep some of it outside the banking system. In a real liquidity event the problem usually isn’t that you’re broke, it’s that you can’t get to what you have.
Buy food and consumables ahead of the price curve instead of behind it. Diesel is already baked into every calorie in your pantry. Deepening your stores today means buying at prices that are almost certainly the lowest you’ll see for a while. Focus on staples you actually eat, and rotate them.
Get fuel and backup power handled. Stabilizer, filters, propane, spare parts. If your generator plan depends on buying gasoline during the emergency, you don’t have a plan.
And don’t make one big irreversible move because of a headline, including this one. The most reliable way people destroy themselves financially in a crisis is panicking at the bottom and buying back at the top. Move deliberately, in steps, according to a plan you wrote down while you were calm.
If you haven’t gone through your economic preparedness plan lately, start with our full guide to preparing for an economic collapse.
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