From Washington to Tokyo and from Paris to London, warning signs are flashing in the world's biggest government debt markets. Anyone doubting this hasn't been paying enough attention to rising long-term interest rates, most notably the spike in the 30-year U.S. Treasury bond yield to 5.25%, its highest level since 2007.

Yet none of the governments in those capitals appear to be contemplating serious measures to put their public finances onto a more sustainable path. This doesn't bode well for the global economic outlook. A bond market crisis in any one of the world's major economies could trigger the same sort of contagion we last saw in the 2010 euro zone sovereign debt market crisis.

Start with the U.S., which is by far the world's largest sovereign debt market. Over the past year, the all-important 10-year Treasury note yield has increased by around 75 basis points to 4.65%. It is slowly inching toward 5% -- a major psychological threshold for investors.

Disturbingly, this upward trajectory in the 10-year yield has occurred at a time when the U.S. government is increasingly financing itself at the short end of the curve. By decreasing the supply of longer-dated Treasury bonds, the increased issuance of Treasury bills normally pushes the 10-year Treasury bond's price up and its yield down. Heightened geopolitical tensions should also be giving a demand boost to government bonds since they are generally considered a haven.

Two related factors seem to be driving down demand: the government's massive budget deficit and its seeming lack of commitment to keep inflation under control.

According to the Congressional Budget Office, the U.S. budget deficit is now on a path to exceed 6% of gross domestic product as far as the eye can see. By 2029, the ratio of public debt to GDP is set to reach 107%, its highest level since the end of World War II. These figures could become considerably more worrying should Congress go along in any meaningful way with the White House's proposal to increase military spending by $500 billion next year.

Against this backdrop, President Donald Trump's calls for interest rate cuts and his unrelenting attacks on the Federal Reserve's independence -- which he renewed this week by again calling for Fed governor Lisa Cook's firing -- are heightening investor concerns that the U.S. might try to inflate its way out from under its mountain of debt.

This could explain why the world's other central banks are reducing the relative proportion of U.S. government bonds that they have in their international reserve holding. (The U.S. dollar currently accounts for 56% of the world's central banks' international reserve holdings, down from a peak of 72% in 2001.) It also might explain why the U.S. must rely increasingly on leveraged hedge funds and money-market funds to finance its $2 trillion-a-year net borrowing need.

Treasury Sec. Scott Bessent has yet to propose a way to rein in the budget deficit. But, judging by his actions, he seems to at least recognize the risk of an unraveling of the U.S. government bond market.

That is likely why he has been engaging in damage control after Fed Chairman Kevin Warsh's press conference caused government bond prices to swoon last month. It is also why he engaged in foreign-exchange intervention last week to prop up the Japanese yen and why he used euros rather than dollars to do so. He is eager to limit pressure on U.S. government bond yields that any additional sale of Treasury bonds would involve.

These sorts of problems won't stay contained within the U.S. In the world's third largest sovereign debt market, Japan, financial markets are signaling trouble ahead. Despite Bessent's foreign-exchange rate intervention, the yen remains close to its 40-year low against the dollar. Meanwhile, long-dated Japanese government bonds have spiked to multidecade highs since the Bank of Japan's ended its yield-control experiment in 2024.

If ever a country needed budget consolidation, it must be Japan, with a public debt to GDP ratio of 230%. Yet Sanae Takiyachi, the country's new prime minister, seems intent on using budget stimulus to promote economic growth. Such a policy will invite an intensification of Japan's foreign exchange and bond market crisis.

In Europe's second and third largest economies, France and the United Kingdom, government bond yields are on a trajectory to hit decadelong highs as investors begin to fret about those countries' public finances. Here, too, there would seem to be little prospect that anything serious will be done to rein in their deficits, which are both hovering around 5% of GDP.

On the contrary, Andy Burnham, the U.K.'s new prime minister, is committed to increasing social spending. In France, where public spending already stands at a staggering 58% of GDP, pressure for even more spending is already starting to build ahead of the country's presidential election in April.

The world's major governments have a decision to make. They can adopt meaningful budget measures now to put their public finances on a sustainable path and avoid a later day of reckoning. Alternatively, they can continue along their current path, inviting a bond-market meltdown that will force them to take corrective measures in a disorderly environment.

Sadly, all the clues seem to be pointing in the direction of the latter.

Guest commentaries like this one are written by authors outside the Barron's newsroom. They reflect the perspective and opinions of the authors. Submit feedback and commentary pitches to ideas@barrons.com .

Desmond Lachman is a senior fellow at the American Enterprise Institute. He was a deputy director in the International Monetary Fund's Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.