Chart of the Week
Long term bond yields in developed markets have seen sustained upward pressure in recent years. In the US, the 30Yr yield is trading above 4.7% in Sep ‘25, while long gilts and bunds are following a similar trajectory. This matters because the yield is the rate investors demand to hold government bonds, and at 30 years it captures expectations for inflation and policy, in addition to fiscal sustainability and debt dynamics. Increasingly, investors are reflecting that the long-term trajectory of developed market debt dynamics is unsustainable, thus pricing in additional risk premia.
Fiscal dominance refers to a regime where government (fiscal) financing needs start dictating monetary policy outcomes. Instead of central banks setting rates purely to achieve inflation and growth objectives, high levels of debt and persistent fiscal slippage force policy to accommodate the treasury’s balance sheet. That dynamic is now creeping into developed markets. Elevated administered policy rates in the US, euro area, UK and Japan are locking in higher funding costs at the same time as governments continue to run deficits. Markets are responding by charging a premium at the long end, with term premia widening steadily since mid ’22.
Emerging markets are used to this playbook. Investors in EM bonds have long demanded higher yields when governments show weak discipline, because once sentiment turns, funding disappears quickly and refinancing becomes prohibitively expensive. The volatility visible in developed market 30Yr curves today resembles the swings that EM bondholders have had to manage for decades.
For Namibia, current yields remain relatively low by historical standards, but the lesson is clear. Sustained fiscal slippage or weak policy credibility can transform investor sentiment abruptly, pushing borrowing costs to unsustainable levels. Long-end weakness in global core markets underscores the importance of maintaining fiscal anchors. Without them, even markets that appear stable today can face sharp and disorderly repricing.
*Pandu Shaduka is a fixed income analyst.**
Fiscal dominance refers to a regime where government (fiscal) financing needs start dictating monetary policy outcomes. Instead of central banks setting rates purely to achieve inflation and growth objectives, high levels of debt and persistent fiscal slippage force policy to accommodate the treasury’s balance sheet. That dynamic is now creeping into developed markets. Elevated administered policy rates in the US, euro area, UK and Japan are locking in higher funding costs at the same time as governments continue to run deficits. Markets are responding by charging a premium at the long end, with term premia widening steadily since mid ’22.
Emerging markets are used to this playbook. Investors in EM bonds have long demanded higher yields when governments show weak discipline, because once sentiment turns, funding disappears quickly and refinancing becomes prohibitively expensive. The volatility visible in developed market 30Yr curves today resembles the swings that EM bondholders have had to manage for decades.
For Namibia, current yields remain relatively low by historical standards, but the lesson is clear. Sustained fiscal slippage or weak policy credibility can transform investor sentiment abruptly, pushing borrowing costs to unsustainable levels. Long-end weakness in global core markets underscores the importance of maintaining fiscal anchors. Without them, even markets that appear stable today can face sharp and disorderly repricing.
*Pandu Shaduka is a fixed income analyst.**
