Global government bond yields climbed sharply this week as investors reassessed the outlook for inflation, public borrowing and energy prices. Market participants increasingly view deglobalization, protectionism and geopolitical fragmentation as forces that could make inflation structurally more persistent than during much of the 2010s. The move has pushed benchmark yields to multi-year or multi-decade highs across the United States, Japan, the U.K. and Germany, while raising the term premium (extra yield investors demand for holding longer-dated bonds). Higher real interest rates are also changing the balance between bonds and equities, although greater inflation volatility may weaken bonds’ diversification benefits. Central banks face a difficult trade-off between containing supply-driven inflation and avoiding aggressive tightening while growth remains sluggish. Rate-hike expectations rose sharply after Federal Reserve Chairman Kevin Warsh’s keynote speech at Jackson Hole, Wyoming, while energy prices and the Iran war added pressure to longer-term yields.