How do government bonds affect global businesses?

Bond yields have been making headlines in 2025, from London to New York. So far, we’ve seen some UK, French and German bonds reach multi-decade highs – taking the conversation beyond financial columns and into business board rooms around the world.

While these terms may feel distant from your day-to-day business operations, understanding bond markets and how they can affect you is crucial for your financial planning – especially if you send or receive payments in foreign currencies.

Bond markets are a key indicator of the wider economy; they underpin movements in multiple global markets.

With expert insights from Karim Buggle, Global Asset Lead at Wise, this guide will break down everything you need to know about what government bonds are, what their yields mean, their impact on your company, and how Wise Business can help you stay in control of your international finances.

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Table of contents
What are government bonds and why do their yields matter? The main players: bonds around the world Bonds in the headlines in 2025 Rising bond yields and your business How Wise Business can help FAQs on government bonds

Disclaimer: The information in this article is for reference purposes only. Wise does not offer to buy or sell bonds, and all information on this page should not be considered financial advice. All investment decisions should be made after thorough research and consultation with a qualified financial advisor and you may be liable for taxes on any earnings. Remember that investments, even in low-risk funds, are never guaranteed and your capital is at risk.

What are government bonds and why do their yields matter?

Put simply, a government bond is a loan made to a government. In return, the government issuing that bond promises to pay back an initial investment plus interest.

Here’s how it works.

A simple breakdown of bonds

When you purchase a bond, you’ll be offered a rate of return on your investment.

The fixed rate of interest on a government bond is called the coupon rate. This rate is written as a percentage of the bond’s face value. For example, a UK government bond may have a coupon rate of 4% per year.

Most bonds give your returns back to you through fixed coupon payments.

If we take our example above, a £10,000 UK government bond with a 4% coupon rate gives you £400 per year; you’ll have £10,400 12 months after purchasing the bond.

You would typically receive this £400 in smaller, periodic payments across the year, such as £100 every quarter, before your initial £10,000 investment is returned to you when the bond matures.

The date you receive the full return on your investment (one-year after purchasing the bond in our example) is called the maturity date.

Typically, governments issue bonds that mature after different periods of time. You might see bonds described as short-term, medium-term (or intermediate-term) or long-term.

Short-term bonds tend to mature within 0-3 years, medium-term within 4-10 years, and long-term bonds maturing after 10 years – with 30-year bonds being a common example.

The government becomes a borrower

Governments create bonds when they need money to fund their spending. Investors buy these bonds and essentially act as lenders to the government.

These investors can be anyone, from an individual living in the country wanting to earn a return on their savings to whole nations looking to invest overseas. The UK, for example, owns a significant amount of US government bonds1.

Bond yields, investors and the business impact

A bond yield is the actual rate of return an investor earns on a bond, reflecting both the fixed interest payment (coupon rate) and the market price of the bond, which constantly fluctuates.

Because a bond's price and its yield move inversely, the yield serves as a live benchmark of investor confidence in a nation's financial health and its economy.

When a government's finances are widely seen as stable, many people want to buy its bonds because they're seen as a more reliable investment; they’re more confident in a healthy and reliable return on holding the bonds for the long-term.

Because of this high demand, the government doesn't have to offer a high return. The price of the bond goes up, and the yield (the return) goes down.

On the other hand, when a government's fiscal policy is seen as risky or unsustainable, fewer people want to buy its bonds.

As governments need to raise money, they have to attract reluctant investors with a better deal. This means the yield (the return) goes up as does the cost of government borrowing.

Therefore, the yield on government bonds acts as a benchmark for the financial health of a nation’s economy.

When government bond yields rise:

• The cost of borrowing for everyone increases. Commercial banks and lenders see that government debt is getting more expensive, so they, in turn, have to raise their own rates to make their debt attractive enough for investors to buy.
• The ripple effect spreads. This causes wider interest rates to go up across the economy, directly impacting the cost of business loans, mortgages, and other forms of credit.

This can make it more expensive for ambitious businesses to secure a loan for expansion, inventory or operations.

The main players: bonds around the world

While many types of bonds exist, government bonds from the world's largest economies are the most influential.

Their yields serve as a benchmark for borrowing costs and investor confidence far beyond their own borders.

Here are some key examples:

Country	Bond	Description
UK	Gilts	Bonds issued by the UK government are called gilts because the paper certificates for bonds in the past had a gilded (golden) edge. As of 16 December 2024, the total value of all outstanding gilts was £2.6 trillion2. This makes up the vast majority of the UK government’s total debt. Around 31% of gilts were held overseas as of the second quarter of 2024.
US	Treasuries	Treasury securities or Treasuries are government bonds issued by the US government. Because the US dollar (USD) is the world’s primary reserve currency, foreign governments and investors seek to hold large amounts in secure places. One of the most common ways they do this is through the purchase of Treasuries. This makes the market for Treasuries the largest and most liquid in the world with their yields acting as a major indicator of global investor sentiment and a key driver of international borrowing costs.
China	Chinese government bonds (CGBs)	China’s onshore bond market is the second-largest in the world, growing to $24.1 trillion (USD) in December 20243. The current size and growth potential of China’s economy makes its bonds popular among domestic and foreign investors.
Japan	Japanese government bonds (JGBs)	Japan’s debt market is the third largest globally, with a total value of $8.67 trillion (USD) at the end of 20244. Its government bonds are a significant asset, with over 50% held by its own central bank5. This is an unconventional situation compared to other major economies as it represents a form of monetary policy known as quantitative easing (QE), where a central bank buys government bonds and other assets to inject money into the economy and keep interest rates low.
France	Obligations assimilables du Trésor (OATs)	In Europe, France has the largest bond market, with a total value of €2.7 trillion as of July 20256. Alongside German Bunds, they act as an indicator for investor sentiment in the eurozone.
Germany	Bunds	Bunds are bonds issued by the German government. Despite its bond market having a total value of around €1.9 trillion (the total debt portfolio as of 20247), which is smaller than France’s (around €2.7 trillion), German Bunds play a significant role in determining interest rates and market confidence in the eurozone.

For businesses operating overseas, understanding how movements in yields of government bonds can affect the wider economy can be crucial in preparing effectively and acting fast.

Yield swings could signal significant changes to government policy that could directly impact your business.

Bonds in the headlines in 2025

In 2025, government bonds have been a major talking point – not just in the financial newspapers, but among international business owners.

From the UK to the US and across Europe, rising yields, inflationary pressures, and policy uncertainty have shone a light on the importance of bond markets for businesses.

Flying UK gilt yields

In 2025, long-term gilt yields climbed sharply. For example, the 30-year UK gilt yield (a type of UK government bond) reached 5.68% in September⁹ – a level last seen in the 1990s.

Experts suggest this may reflect investor concerns over the UK government’s borrowing costs, inflation expectations, and fiscal deficits. UK Chancellor Rachel Reeves will attempt to address the UK’s deficit in the government’s Autumn Budget on 26 November.

As of Q2 2024, roughly 31% of outstanding gilts were held overseas. When overseas investors believe returns need to be higher to match their risk, they may demand greater yields or sell their holdings. This puts more pressure on gilts and the UK government’s borrowing power – ultimately increasing the cost of borrowing, and often, as a result, adding to the government's debt pile.

US Treasuries staying high

Yields on US Treasuries stayed relatively high (around 4.5%) in 2025¹⁰. However, the 10-year Treasury yield dipped towards the end of summer, potentially reflecting expectations for interest rate cuts from the Federal Reserve before 2026 – although rising inflation could keep the central bank cautious.

Eurozone bonds

In the EU, bond yields in core countries like Germany (German Bunds) and France (OATs) have risen in 2025.

Yields on German¹¹ and French¹² 30-year bonds reached 14-year highs in August 2025, pulling up borrowing costs across both regions.

Rising bond yields and your business

When yields on government bonds rise, it has a domino effect that can directly impact your business's bottom line.

Let’s break it down.

Borrowing costs

A rise in government bond yields can often lead to an increase in broader interest rates, making it more expensive for your business to borrow money. Here’s why:

Let’s say government bond yields have risen by 1%. This means lenders can now earn a higher return by investing in these bonds.

Banks also need to borrow money to fund their operations, so they now see their own cost of borrowing money increasing.

To attract lenders themselves, they may have to offer higher returns, or risk their own capital reserves becoming more expensive to maintain.

To keep their profit margins healthy, banks will likely pass this higher cost of borrowing on to their customers. They do this by increasing the interest rates on products like mortgages, overdrafts, and business loans.

For your business, this could mean that loans, overdrafts, and other forms of borrowing become more expensive, making it harder to secure capital for growth or investment.

As previously mentioned, bond yields have reached multi-decade highs in the UK in 2025. And the impact of these higher yields extend beyond higher business borrowings.

As Karim explains, "For the last decade, businesses operated in a world of near-zero cost of capital, but the recent surge in bond yields marks a definitive end to that era.”

“This isn't just about higher loan payments, it's a fundamental shift that encourages a greater focus on capital efficiency and sustainable growth.

“In this new environment, ensuring your cash isn't idle has become an important part of a sound financial strategy."

When government bond yields push interest rates higher, your business's cash reserves can work harder for you.

At Wise Business, our Interest product allows UK businesses to earn a variable return on your pound sterling, euro, and US dollars. This helps you put your idle money to work and extend your runway.

With Interest, your funds are invested in high-quality, short-term money market funds backed by government-guaranteed assets.

Because these funds track central bank interest rates, your returns adjust quickly when those rates change. Returns update daily, and you can spend your money straight away with easy access*.

*Capital at risk, returns not guaranteed. See wise.com/interest for more information.

💡 Learn more about Interest

The currency connection

When a country's government bond yields rise, especially relative to other major economies, its bonds become more attractive to international investors.

To invest in these bonds, foreign investors need to purchase the country's currency, which increases its demand on the FX markets. This increased demand can cause the currency's value to strengthen.

This can affect your business in different ways:

Positive impact

A stronger home currency makes imports cheaper and reduces the cost of paying foreign suppliers or remote teams.

For example, let’s say your UK business imports goods from the US. You typically budget **£110,000 per year **for the goods which cost $150,000.

However, in the days before settling your invoice, 10-year gilt yields rise by 2%, strengthening the pound against the dollar. This means your $150,000 worth of goods will now only cost you £105,000.

Being able to access your pounds and exchange to dollars at speed means you can take advantage of favourable rates and potentially save on your cross-currency transactions.

Acting fast with the right financial tools could mean saving £5,000 if you found yourself in the scenario above.

High yields in the UK tend to strengthen GBP – good if your business receives the currency, but costly if you pay suppliers in GBP or if competitors with GBP costs benefit.

Negative impact

A stronger home currency makes your own exports more expensive for international customers, and reduces the value of your overseas revenue when you bring it home and exchange it into your reporting currency.

For example, let’s say your UK business provides a service to a US client for £10,000. The client agrees to send you $15,000 for the service based on the exchange rates when the contract was agreed.

But, in the days before your client pays, 30-year gilt yields suddenly rise, pushing up the value of the pound against the dollar. This means your $15,000 payment will now be worth less than the pre-agreed £10,000 once it’s been received and converted into pounds.

These two outcomes highlight the importance of managing your multi-currency business operations.

Tools like Wise Business/a Wise Business multi-currency account enables you to hold and exchange currencies quickly and cheaply and manage FX risk when currency volatility threatens your profit margins.

With a Wise Business account, you can hold GBP and convert to USD in as little as 20 seconds – helping you move at speed when markets react.

And, if bond yields cause currency markets to move against you, you can offset some of the potential losses by converting at the mid-market exchange rate (similar to the rate you see on Google) with low, transparent fees.

Investor sentiment

Higher bond yields mean investors get a better rate of return for a government-backed asset. This might make riskier investments, such as funding a startup, less appealing.

If your business is looking to raise funding, higher bond yields might reduce your access to capital. In this instance, it’s important to build relationships with a deep pool of investors – even those overseas.

While overseas investment can expand your funding opportunities, it brings its own set of challenges.

A major concern for businesses is receiving investments in foreign currencies. If you’re a UK business, you might not have a US bank account to receive USD from an American investor or a German bank account to receive euros (EUR).

Opening these accounts can be extremely time-consuming, not always possible, and expensive for investors sending payments to you from overseas.

What’s more, even if you can receive foreign currencies into your UK bank account, your capital is at the mercy of the foreign exchange (FX) markets and transaction fees as money moves across borders.

Many UK accounts offer poor FX rates and hide fees that can eat into your earnings. That’s why it’s essential you work with a provider that can help you receive funds in foreign currencies easily and cheaply.

With a Wise Business account, you can receive money from investors around the world in 23+ currencies, including USD, EUR, and more, all in one place. This means no international bank accounts, no long-winded paperwork, no hassle for you and a cheaper and easier experience for your investors.

And, when you exchange currencies with Wise, you’ll always be offered the mid-market exchange rate with low, transparent fees. This helps you save money and means you’ll know exactly what the whole transaction will cost end to end.

Open a Wise Business account today to take your investment journey to new places.

How Wise Business can help

Bond markets may feel distant from your day-to-day, but their impact can be significant.

When yields rise, borrowing becomes more expensive, currencies move, and international payments can quickly eat into margins. That’s where Wise Business helps you stay in control.

Protect your margins from FX volatility and higher borrowing costs

As government bond yields push currencies higher or lower, your international payments may suddenly cost more.

With Wise Business, you always get the mid-market exchange rate with no hidden fees. That means you can manage unnecessary FX costs on supplier invoices, payroll, and overseas earnings, helping to protect your profit margins.

And, while bond markets can push loan rates higher, your reduced FX and payment fees can free up cash to offset higher financing costs elsewhere – improving your cashflow and helping your business grow.

Earn a return on your cash balances

With bond yields and interest rates sitting at high levels in many major economies, your cash reserves can do more for your business than you might think.

In the UK, our Interest feature helps businesses earn a return on their balances.

As Karim explains: “We built our Interest feature precisely for a high interest rate environment. When central banks raise rates, it creates an opportunity for businesses to earn a meaningful return on their cash balances in GBP, EUR, and USD.”

We wanted to give them a simple way to turn a challenging economic climate into a chance to strengthen their financial position.”

“This isn't just about earning a return; it's about actively extending your runway and offsetting higher costs elsewhere, all while keeping your funds easily accessible for day-to-day operations."

With Interest, your funds are invested* in high-quality, short-term money market funds backed by government-guaranteed assets.

Because these funds track central bank interest rates, your returns adjust quickly when those rates change. Returns update daily, and you can continue to send and spend the money in your account with easy access*. Your capital at risk and returns not guaranteed. See wise.com/interest for more information.

*Daily withdrawal limit of £100,000/ €120,000 for businesses.

Stay agile with a multi-currency account

Wise Business lets you hold and manage multiple currencies within one account, helping you prepare and act quickly when currencies strengthen or weaken in response to bond yield movements and other economic trends.

You can choose the best time to convert or use our Auto Conversion feature to help you manage cash flow more strategically.

Auto Conversions allow you to set a target exchange rate which, if met, is automatically converted in your account. This means you can capitalise on favourable market movements without wasting countless hours staring at the FX markets.

In short: you can’t control government bond yields – but you can utilise ways to manage their potential impacts on your business.

When you target an exchange rate with Auto Conversion, you’ll be getting the mid-market exchange rate for that currency pair.

Wise Business helps you hold, send, receive, and convert money globally with low, transparent fees, so you can focus on running your business, not second-guessing markets.

Open a Wise Business account today to stay one step ahead of bond market uncertainty.

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FAQs on government bonds

What is a government bond yield?

A government bond yield is the return an investor receives on a bond issued by a national government. It’s a key indicator that signals investor sentiment and influences broader interest rates for people and businesses in the wider economy.

How do rising government bond yields affect my business borrowing?

Rising government bond yields can lead to higher borrowing costs. Lenders use government bond yields as a benchmark, so when yields increase, you can expect the interest rates on business loans and overdrafts to rise as well.

What are UK Gilts and US Treasuries?

Gilts are bonds issued by the UK government, and Treasuries are bonds issued by the US government. Both are considered secure investments, and their yields act as a benchmark for the wider financial systems in their respective regions and globally.

How can my business plan for higher interest rates?

To plan for higher interest rates, you can review your cash flow and borrowing costs; speak to your accountant or a qualified financial advisor about the best strategy for your business growth.

Consider using financial tools that help you manage currency risk and earn a return on your money.

What does it mean when the bond market goes down?

When the bond market "goes down," it is a simple way of saying that bond prices are falling.

This means that existing bonds are trading for less than their previous value. A falling bond price is a key indicator of investor sentiment because it signals that the bonds are less desirable.

Because bond prices and yields move inversely, a falling market actually means that bond yields are rising. This is often caused by investor concerns about rising inflation or economic instability. When a bond market goes down, it can be a warning sign that higher borrowing costs and increased currency volatility may be on the horizon.

Can I buy government bonds through my Wise Business account?

Wise Business offers a feature called Interest which allows your business to earn a return on your GBP, EUR and USD balances through government fixed income securities (such as bonds) and money market instruments (MMIs) via our partnership with BlackRock – a leading asset manager.

• The GBP fund is called the BlackRock ICS Sterling Government Liquidity Fund and is offered through Wise Assets.
• The USD fund is called the BlackRock ICS US Treasury Fund and is offered through Wise Assets.
• The EUR fund is called the BlackRock ICS Euro Government Liquidity Fund and is offered through Wise Assets.

You can turn on Interest in your Wise Business account and start earning a return from government-backed assets like bonds.

Investments can fluctuate, and your capital is at risk. The Variable rate is based on the performance of the Fund over a 7-day period ending on 9/26/2025. The Fund has achieved an average annual return of 2.76% over a 5-year rolling period exclusive of fees. Interest is offered by Wise Assets UK Ltd, a subsidiary of Wise Payments Ltd. Wise Assets UK Ltd is authorised and regulated by the Financial Conduct Authority with registration number 839689. When facilitating access to Wise investment products, Wise Payments Ltd acts as an Introducer Appointed Representative of Wise Assets UK Ltd. Please be aware that we do not offer investment advice, and you may be liable for taxes on any earnings. If you're uncertain, we urge you to seek professional advice. To find out more about the Funds, visit our website.

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Sources used:

1. 5 Foreign Countries That Own the Most U.S. Debt | Investopedia
2. What are gilts a simple guide | Commons Library
3. China’s evolving fixed income landscape – a new phase for onshore bonds? | M&G
4. Japan’s government debt climbs to record ¥1.32 quadrillion | Japan Times
5. Bank of Japan owns 52% of all domestic government bonds | Insights
6. Debt Key Figures | République Française
7. Federal Bonds | Bundesrepublik Deutschland
8. The Impact of COVID-19 Pandemic on Government Bond Yields | Frontiers
9. United Kingdom 30-Year Treasury Gilt Auction | Trading Economics
10. U.S. 10 Year Treasury Note | Market Watch
11. Germany 30 Year Government Bond | Market Watch
12. France 30 Year Government Bond | Market Watch