Government bonds are debt instruments. When a government needs to borrow money, it will issue a bond in the capital market to raise money.
Government bond yields of that particular country, basically tells the investor the financial health of the economy and where the future interest rates are going, up or down. When the yield goes up, the government has to pay a higher interest on the bond to the investor who hold that bond. So normally the higher the debit of a country the higher the interest, because that country has a higher risk of default meaning it may not be able to pay the interest on it's bond in the future. If the investor believes that the country can pay it's debt,it could mean the economy is recovering and inflation is going up in the future.
When the yields go up on a bond, the investor is losing money on the bond's price value. However if the investor holds the bond he gets a higher return of interest, which the yield represents.
The opposite is when the bond yield goes down and the bond investor had bought the bond at a higher yield, the investor making money on the bond. If the investor holds his bond he receives a lower interest rate of return. The lower interest represents a higher demand for that bond by the market. The investor sees lower growth on the economy, still believes that the government can pay it's debt.
World Government debt levels are at historical highs and most governments bond yields are at historical lows. This does not make any sense, as most governments are not able to pay their debts in the future. If the world economy starts to recover and higher inflation, the yields start going up and they will not be able to pay the interest on the bonds at that higher yield. This could result a panic sell off.
The end of 2015, the US central bank keeps say that it's going the rise it's interest rates four times in 2016 year. The reality is no interest rate increase so far as of August 2016. The US can not afford higher yields. Central banks keep printing money to create inflation.
Bond yields keep going lower instead of going up. The global central banks have been buying their own bonds, with the newly printed money to keep the yields lower as global debt gets higher and higher every year. This will not be able to go on forever.
When inflation starts to appear it will create a panic sell off in the bond market, resulting in the biggest global crisis. Higher cost of capital will also influence a sell off in the equity market.
Here are some charts showing the bond yields going lower, meaning no recovery in the real economy
South African 10 year Bond
Four countries at negative yields on their government bonds, meaning that you lend money to the government and they will charge you a interest rate instead of you receiving a interest rate on your bond investment. The four countries with a negative yield are Japan, Switzerland ,Germany and Netherlands. I believe that the US Bond yields will also go negative in the future, due to central banks buying their own bonds and market manipulation.