Selling is continuing in the global bond market as inflation pressures from high oil prices and concerns over fiscal deterioration in major advanced economies overlap.
According to the electronic trading platform Tradeweb, the 30-year U.S. Treasury yield topped 5.18% at about 9:40 a.m. on the 19th Eastern time. It is the first time in 19 years that the 30-year Treasury yield has exceeded 5.18%, since July 2007 before the global financial crisis.
The 10-year U.S. Treasury yield also stood in the 4.66% range at the same time, up 0.04 percentage point from the previous session. It is the highest level in 1 year and 4 months since January last year. The 10-year Treasury yield, regarded as the benchmark for the global bond market, broke through 4.5% on the 15th, a level seen as a strong psychological resistance, and has continued to rise.
Bond prices and yields move in opposite directions, so rising bond yields mean falling bond prices. As energy prices surged on the back of the Middle East war, inflation gauges jumped, and concerns that the Strait of Hormuz could remain blocked for a prolonged period also added to inflation fears. This trend has driven a simultaneous rise in global bond yields.
Concerns over fiscal soundness in major advanced economies are also fueling higher rates. The United Kingdom, Japan, and the United States are facing upward pressure on government bond yields as worries about fiscal deterioration grow amid heavy national debt burdens.
With Kevin Warsh set to take office as the next U.S. Federal Reserve (Fed) chair on the 22nd, financial markets are leaning toward the possibility that the Fed will raise rates within the year despite President Donald Trump's pressure to cut.
According to the Chicago Mercantile Exchange (CME) FedWatch, the fed funds futures market on the day priced a 55% chance that the Fed will raise rates by at least 0.25 percentage point by December.