Bond markets face brutal quarter as Middle East war drives borrowing costs to multi-decade highs

Bond markets face a brutal quarter as Middle East war inflation risks worsen global fiscal health, driving borrowing costs to multi-decade highs. The 10-year US Treasury yield rose 81 basis points in Q3, its steepest quarterly climb since 2022. Investors expect higher-for-longer interest rates after September's hawkish central bank shifts. Japan's 10-year yield is set for its biggest quarterly rise in over two decades, while stocks remain propped up by AI trade optimism despite infrastructure investment concerns. October brings key tests including US jobs data, French budget talks, and a UK budget. Wednesday's European data includes German retail sales and CPI, UK GDP, and French inflation figures.