War Drags On, Bond Markets Break Down

Global bond markets are facing a deepening sell-off as prolonged geopolitical conflict keeps inflation expectations elevated. Investors are dumping government bonds across major economies, pushing yields sharply higher. The message from markets is clear: if wars don't end, price pressures won't either — and central banks will have no room to cut rates.

The mechanism is straightforward. Wars disrupt energy supplies, food shipments, and global trade routes. Every extra month of conflict adds new layers of cost to the global economy. When inflation expectations rise, bond prices fall and yields climb — meaning governments and corporations pay more to borrow. That pain eventually reaches consumers through higher mortgage rates, credit card costs, and business loans.

This isn't a short-term blip. Bond markets are among the most sophisticated in the world — they don't panic easily. When institutional investors start selling sovereign debt at scale, it signals a fundamental reassessment of the inflation outlook. The question now is whether central banks in the U.S., Europe, and emerging markets will be forced to keep rates higher for longer, just when their economies desperately need relief.

Levent KAYIRA Commentary: Ekonomik Gündem Analysis: Turkey sits at the intersection of every pressure point in this story. We import energy, we're geographically exposed to conflict zones, and our inflation fight is still unfinished. When global bond yields rise, the competition for capital intensifies — and Turkey has to offer even higher returns to keep foreign investors interested in lira assets.

The TCMB has worked hard to rebuild credibility since the 2023 policy pivot. But rising global yields complicate that story. If the Fed and ECB delay rate cuts — or reverse course — Turkey's own rate cut timeline gets pushed back too. That means mortgage rates, vehicle loans, and SME financing stay expensive well into 2025.

For local investors, this environment favors short-duration instruments. Sitting in long-term fixed-rate bonds right now carries real mark-to-market risk. Eurobond spreads for Turkish corporates could widen if global risk appetite deteriorates further.

The 15 years I spent on trading desks taught me one thing: bond markets don't lie. When they sell off this broadly, something structural is shifting. Turkish savers and borrowers should pay close attention.

Kaynak: Google News Ekonomi