US Treasury yields hit multi-year highs for a seventh consecutive session on Thursday, extending a historic bond-market selloff before a decline in oil prices helped stabilize markets battered by their worst quarterly performance in decades, according to Reuters.
The benchmark 10-year Treasury yield rose as high as 5.31%, its highest level since 2007, before easing to just below 5.28%. The yield climbed 87.1 basis points during the September quarter, marking its biggest quarterly increase since 1994, according to LSEG data cited by Reuters.
The 30-year Treasury yield also climbed above 5.65%, reaching its highest level since 2002. The sharp rise in long-term borrowing costs has intensified concerns over the outlook for inflation, government financing and economic growth.
Bond yields rise when prices fall, and the latest moves have reflected a broad reassessment of where interest rates may settle as inflationary pressures persist. Higher energy prices have added to concerns over inflation, while heavy investment in artificial intelligence and data centres has strengthened expectations for economic growth and potentially higher rates, the report stated.
The rise in Treasury yields is significant because US government bonds serve as a benchmark for borrowing costs across global financial markets. Higher yields can increase financing costs for companies and households, while also raising the amount governments must spend on servicing their debt.
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Global bond markets under pressure
The selloff has extended beyond the United States. Japanese government bond yields have posted double-digit increases for five consecutive quarters, an unprecedented run, as inflation has become more entrenched after decades of deflation.
European bond futures also came under pressure on Thursday, while cash bond markets in Australia, South Korea and Japan faced renewed selling.
The global rise in yields reflects a combination of inflation concerns, higher energy costs and expectations that strong investment in areas such as artificial intelligence and data centres could keep economic activity resilient.
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Markets reassess Fed outlook
Investors have also been rapidly adjusting expectations for the path of US monetary policy. After the Federal Reserve raised rates last month, markets are now pricing in at least three more rate increases before mid-2027, according to Reuters.
The shift marks a significant change from earlier expectations that the Federal Reserve would move toward lower borrowing costs. Persistent inflation and resilient economic activity have instead raised expectations that interest rates could remain elevated for longer.
The surge in longer-term Treasury yields has also raised questions about how much further the bond-market selloff can run. Market participants are watching whether higher yields eventually begin to weigh more heavily on risk assets, corporate borrowing and economic activity.
For now, a decline in oil prices has provided some relief to bond markets by easing immediate inflation concerns. However, investors remain focused on the possibility that higher energy costs, strong economic growth and large government borrowing needs could keep upward pressure on yields, Reuters reported.
The September quarter's sharp rise in Treasury yields underscores the scale of the repricing across global fixed-income markets, with investors increasingly preparing for a period in which borrowing costs may remain substantially higher than previously expected.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
