G10 Forward Yields Signal Markets Expect Higher Borrowing Costs for Decades

Bond markets are pricing significantly higher long-term yields across most major developed economies.
The gap between current 10-year yields and 10y10y forward yields is positive across every market in the latest comparison.
The U.S. sits at 4.81% versus a 5.33% 10y10y forward rate, a gap of roughly 52 basis points.
The repricing is even larger elsewhere. Germany is at 3.51% versus 4.25%, France 4.91% versus 5.72%, Italy 4.64% versus 5.51%, and the UK 5.49% versus 6.44%.
Japan stands out most dramatically, with its current 10-year yield at 3.09% while the 10y10y forward rate is around 4.85%, a gap of roughly 176 basis points.
Australia is at 5.39% versus 6.17%, Canada at 3.99% versus 4.49%, while Switzerland remains the lowest-yielding market at 0.54% versus 0.78%.
The message from forward markets is that investors are not expecting borrowing costs to simply return to the ultra-low-rate environment that existed before the recent inflation cycle.
Instead, markets are pricing higher long-term compensation for inflation uncertainty, government debt issuance and fiscal risk.
If these forward rates persist, the higher-for-longer story may be much more structural than a single central-bank tightening cycle.