G7 finance chiefs seek to tackle imbalances in wake of bond selloff

G7 finance ministers acknowledged mounting concern over public debt and bond market volatility as they met in Paris on Monday in the wake of a bond market selloff triggered ‌by fears over inflation risks from the Iran war, Reuters reported.

Ministers are set to discuss the economic fallout from the conflict and volatility on global bond markets, which are of particular concern to Japan, as they also seek common ground on tackling economic tensions and global imbalances, according to Reuters.

Bonds from Tokyo to New York extended losses on Monday, with investors betting on central bank rate hikes over worries that rising energy prices could stoke inflation.

Asked if bond markets were collapsing, French Finance Minister Roland Lescure said: “They’re undergoing a correction – I wouldn’t say they’re collapsing.”

“We are no longer in a period where public debt is not a subject,” he told reporters as he arrived at the meeting.

The meeting, which will also be attended by representatives from ⁠G7 central banks, will tackle how countries can co-ordinate their response to shocks such as inflation through temporary, targeted and reversible measures, the French finance ministry said.

German central bank head Joachim Nagel said that policymakers could do a lot to calm markets and give them positive momentum.

Asked on arrival if she was worried by the bond selloff, European Central Bank head Christine Lagarde told reporters: “I always worry, that’s my job.”

Japanese Finance Minister Satsuki Katayama said she was instructed by Prime Minister Sanae Takaichi to “minimize various risks”, when asked about the rise in long-term interest rates, without elaborating.

The G7 finance ministers will try to find common ground on tackling global economic tensions and coordinating critical raw material supplies.

“Don’t put in place measures that would make the situation worse,” International Monetary Fund chief Kristalina Georgieva said as she arrived for the meeting.

Finance ministers will be looking for an update on U.S.-China relations following the Trump-Xi summit and the latest U.S. efforts to re-open the Strait of Hormuz.

U.S. Treasury Secretary Scott Bessent said the trip to China had been very successful, adding that he would urge the G7 to follow sanctions to target Iran’s “war machine”.

Reuters also reported that Syria would take part in a closed-door session with G7 finance ministers and central bank governors in Paris on Monday.

The two-day G7 finance chiefs’ meeting is dominated by global economic imbalances, trade tensions and the fallout from conflicts in the Middle East and Ukraine.