The US 30-year Treasury bond yield rose by more than 3 basis points to 5.444%, marking its highest level since 2004, as a result of an ongoing selloff in bond markets. This surge in long-dated US borrowing costs indicates increased pressure on the bond market.
This trend is influenced by several factors, including strong US growth data and rising inflation pressures, which have led traders to anticipate further Federal Reserve rate hikes. Additionally, a fresh increase in oil prices, with Brent crude nearing $104 a barrel, has contributed to the selling in bonds. The S&P 500 futures dropped by 0.6%, while Nasdaq 100 contracts fell by 1%, reflecting the negative impact on equity markets.
The global impact of the bond rout is evident, with yields in Japan, Australia, and New Zealand climbing by over 10 basis points. Analysts, such as Simon Wiersma from ING Bank, suggest that higher yields might cap valuation expansion in equities, making earnings growth increasingly crucial. Alessandro Gabellone of Bank Degroof Petercam notes that while a resolution in the Middle East could bring some relief, particularly to European rates, the US situation is more complex due to persistent inflation above target and growing fiscal imbalances. Furthermore, New York Federal Reserve President John Williams confirmed expectations for another rate hike before year-end, reinforcing the hawkish outlook.
Treasury Secretary Scott Bessent has taken measures, including buying back longer-dated Treasuries and intervening in currency markets, to stabilize bond yields. Despite these efforts, the yield on the 30-year U.S. Treasury bond soared as high as 5.446%, and the 10-year Treasury note yield hit 5.15%, a level not seen since 2007. The Treasury Department is scheduled to buy back up to $6 billion worth of 20- to 30-year bonds, following an earlier buyback that unexpectedly led to higher yields.
