World’s Long-Dated Bonds Face Traditionally Terrible Month

Longer-maturity bonds may be in for a treacherous September, if history is any guide.

Over the last decade, government bonds globally with maturities of over 10 years posted a median loss of 2% in September, according to data compiled by Bloomberg. That’s the worst monthly performance of the year.

That trend will worry bond investors, with the longest-dated debt already lagging behind shorter maturities this year on concern governments will ramp up borrowing to fund spending pledges. What could worsen it is sticky inflation in Japan, political turmoil in France, and speculation that President Donald Trump may push the Federal Reserve to cut interest rates, amplifying price pressures stateside.

“The market right now feels downright unpleasant,” said Hideo Shimomura, senior portfolio manager at Fivestar Asset Management Co. in Tokyo. “September is often when monetary policy takes a sharp turn,” and a month when positioning in anticipation of moves often shows up, he said.

US payrolls data on Friday poses a near-term risk for the market as traders wait to confirm bets on a Fed rate cut this month. Eurozone inflation data is also on traders’ radar as they watch for any potential surprise, with policymakers widely seen keeping rates steady next week.

Meanwhile, France is in an acute political crisis that has pushed yields there higher with Prime Minister Francois Bayrou seeking support for a Sept. 8 confidence vote.

Some like Chris Weston, head of research at Pepperstone Group, cite the typical September pickup in issuance for the seasonal slump in long-end bonds. Mohit Kumar, chief European strategist at Jefferies International, concurs.

The September seasonality is “mostly issuance related,” said Kumar. “We don’t have a lot of issuance during July and August and then not much post-mid November.”

Japan’s 10-year note auction on Tuesday followed by a 30-year bond sale later this week are being closely watched by investors. They are keen to gauge demand for the nation’s debt amid questions over Prime Minister Shigeru Ishiba’s leadership and expectations for Bank of Japan rate hikes.

Globally, returns on ultra-long bonds have fallen 2.6% since June 30, putting them on track for their first quarterly decline of 2025. They’ve trimmed year-to-date gains to 3.5%, while shorter-dated notes are up 7.9% over the same period.

For Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc. in London, stronger-than-expected US data and a potential hawkish pivot by the BOJ are among catalysts that could worsen this month for bonds.

There are “a lot of risks to navigate,” she said.