(Bloomberg) — Yields on the US Treasury’s longest-dated bond rose to the highest level in almost two decades as investor concerns mount that accelerating inflation will force central bankers to raise interest rates.
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The 30-year yield rose as much as seven basis points to 5.20% on Tuesday, a level last seen on the eve of the 2007 global financial crisis. Bond markets across Europe and Japan also fell, while the selloff spilled over into US equity markets.
Yields on government bonds have surged globally in recent weeks as a jump in energy prices caused by the Iran war adds to inflation fears, pushing traders to bet the Federal Reserve will hike rates as soon as this year. Mounting deficits are also prompting investors to demand greater compensation to own longer-maturity debt.
“The bond market is pricing in a higher-for-longer rate policy, most visible in the long end of the curve where duration sensitivity is the greatest,” said Liz Templeton, a senior product manager at Morningstar. That reflects “ongoing uncertainty around Fed policy, energy-driven cost pressures, and heavier Treasury issuance.”
Persistently higher yields threaten to slow the US economy, which has so far proved resilient, and lift borrowing costs for US home buyers and corporations. That prospect is fueling speculation about a policy response by US officials, who already have shifted debt issuance toward shorter-dated maturities.
Worryingly for bondholders, Tuesday’s selloff was not driven by a surge in oil prices — which crept lower on the day — or any individual catalyst. That speaks to a broader nervousness in the market as investors reappraise the clearing price for debt. US 10-year Treasury yields rose as much as 10 basis points to 4.69%, the highest since early 2025, before the move pared to around 4.66%.
Heavy trading in Treasury futures helped drive the move, particularly in contracts tied to five- and 10-year notes. Investors placed several sizable block trades as yields kept rising, and trading volume in the 10-year futures contract during the morning session in New York was nearly twice the recent average.
The shift in market sentiment will soon confront incoming Federal Reserve Chair Kevin Warsh. Traders anticipate the Fed’s next move will be a rate increase, potentially as soon as the end of this year. When the Iran war began in late February, they anticipated as many as three Fed cuts in 2026.