Global bonds, stocks, selloff pauses as oil retreats from multi-month high

Markets experienced a temporary pause in selling of global bonds and stocks on Friday as oil prices decreased from a four-month peak. However, concerns about inflation continued to drive expectations that central banks might need to increase policy rates. Brent crude oil reached a four-month high of US$109.97 a barrel following a 6% increase the previous day, but later declined almost 2% to US$105.90.

Oil supply constraints persisted due to the US-Iran conflict and Yemen's port of Mocha being taken over by Iran-aligned Houthis, threatening Saudi oil exports. These events contributed to market uncertainty. President Trump's comments about the war extending beyond the November midterm elections further increased bond yields globally.

The 10-year Treasury yield was little changed at 4.946%, while the 30-year yield reached a 19-year high of 5.3836%. The 2-year yield hit a 14-month peak of 4.5961%. The selloff in US bonds was partly due to a Treasury buyback program that fell short of expectations. European bond yields also rose, with the 10-year German Bund yield increasing by 1 bp for the day.

Analysts expect higher interest rates for longer, with eight of the nine developed-market central banks, including the Fed, likely to raise rates by the end of the year.