Global bond sell-off gains pace, Treasury yields at 16-year high
A sell-off in global bond markets gathered pace, driving yields to the highest level in more than a decade as traders brace for an extended period of tight monetary policy.
The yield on 30-year U.S. Treasuries hit 5% for the first time since 2007 on Wednesday, while the German 10-year benchmark rate climbed to 3% — a level unseen since 2011. In Japan, the 10-year overnight-indexed swaps jumped to 1% for the first time since January.
Investors are demanding ever higher compensation to hold long-dated debt after major central banks made clear they were unlikely to ease policy any time soon. Concerns about increased Treasury issuance to fund swelling budget deficits have also weighed on longer securities.
“US yields at highs for the year are starting to look disruptive for other regions and sectors in global fixed income,” HSBC Holdings Plc strategist Steven Major wrote in a note to clients.
The volatility has also spilled over into equities and is spreading to corporate notes, with at least two borrowers standing down from issuing Tuesday as blue-chip yields reached a 2023 high of 6.15%. The largest speculative-grade bond ETF was hit by the biggest two-day slump this year.
“These moves are starting to cause worries across all asset classes,” said James Wilson, a money manager at Jamieson Coote Bonds Pty in Melbourne. “There’s a buyer’s strike at the moment and no one wants to step in front of rising yields, despite getting to quite oversold levels.”
Bond losses accelerated on Tuesday after an unexpected jump in job openings reinforced speculation that the Federal Reserve isn’t done raising interest rates. The term premium on 10-year US notes turned positive for the first time since June 2021.
Global bonds are now down
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