Long-dated US borrowing costs reached their highest point in over 20 years on Thursday, as a months-long selloff intensified across bond markets. The yield on the 30-year US Treasury bond climbed more than 3 basis points to 5.444%, marking its highest level since 2004 as prices fell. This surge follows a broader trend where US and global yields jumped on Wednesday, fueled by data pointing to an overheating economy, which prompted traders to increase bets on further Federal Reserve rate hikes.
The global bond selloff is attributed to several factors, including the inflationary impact of the US war in Iran, a robust US economy, and a high volume of corporate and government bond issuance. US two-year bond yields have climbed more than 150 basis points since the start of the US-Iran war, while 30-year yields are up more than 80 basis points. The average yield on a government bond globally now sits just below 4%, the highest level since 2007, according to a Bloomberg index.
The rising yields are also contributing to a decline in US stocks. The S&P 500 futures dropped 0.6%, and Nasdaq 100 contracts slid 1%. Higher-for-longer rate expectations are putting the dollar on course for its longest winning streak since May. Analysts like Simon Wiersma of ING Bank suggest that while higher yields might not trigger a broad equity bear market, they are likely to cap valuation expansion and make earnings growth increasingly important. The selloff also spread to Asia, with yields in Japan, Australia, and New Zealand climbing by more than 10 basis points on Thursday.
