Global bond yields have spiked to new highs, and share markets have slumped, primarily due to surging oil prices inflaming inflation risks. The yield on 10-year US Treasury notes climbed 18 basis points this week, reaching 4.96% on Friday, its most elevated level since 2023 and approaching its highest since 2007. This is just below the psychologically significant 5% mark, which could either attract buyers or trigger further selling across global markets.
The selloff was accelerated by rising oil prices, with Brent crude hitting $109 a barrel, and increased inflation fears. Two-year Treasury yields surged 16 basis points to 4.59%, the largest one-day rise since April 2025, and 30-year bond yields rose 8 basis points to 5.37%, a 19-year high. These movements indicate that traders are anticipating the Federal Reserve may raise interest rates as soon as next week, with a roughly 70% probability priced in.
Adding to the market's unease, a Treasury buyback operation designed to stabilize the market fell short of expectations. Treasury Secretary Scott Bessent's department purchased only $5.19 billion of 10- to 20-year debt, less than the $6 billion maximum announced. Analysts like George Catrambone of DWS Americas criticized this as insufficient to counter the market forces, stating it's "not enough to quell the premium investors want to receive to buy US 30-year debt." This operation has fueled skepticism about the current administration's ability to ease the ongoing selloff.
The impact is global, with Australian three-year government bond yields hitting a 15-year high of 5.047% and Japan's 10-year government bond yields rising to 2.97%. JPMorgan analysts now predict eight out of nine developed-market central banks, including the Fed and the Bank of Japan, will raise interest rates by year-end. This global tightening is expected to be shallow, but risks lean towards more aggressive action given resilient growth, sticky core inflation, and commodity price pressures. Higher bond yields are also impacting corporate valuations and raising US mortgage rates, which could further hamstring the housing market.
