The world’s largest sovereign bond markets are heading toward their worst month in years as higher energy costs fuel inflation and the AI boom supports economic growth. Two-year US Treasury yields have climbed almost 60 basis points in September, while borrowing costs in France, Germany, Britain and Australia are set for their sharpest monthly increases since March, when the Iran war began and triggered a new energy shock. Japanese government bond yields remain near multi-decade highs. The move matters because sovereign yields influence mortgage and corporate borrowing costs, with rapid increases posing risks to financial and economic stability. Some investors now view elevated yields as an opportunity, while others remain wary of long-dated debt because of high government borrowing. October will bring US jobs and inflation data, French budget talks, a UK budget and likely additional bond issuance by technology companies. Bond sales by hyperscalers have more than doubled this year to over $200 billion, adding to competition for investor funding.