Global bond selloff rolls on, US 30-year yield at highest since 2004

Global bond selloff continues, with US 30-year yields reaching their highest level since 2004. This surge in yields has been driven by concerns over high energy costs, robust economic growth, and increased government spending. The 30-year Treasury bond yield climbed to 5.48%, while the benchmark 10-year yield reached 5.20%. Despite the resilience of economic growth, corporate profits, and spending, particularly fueled by the AI boom, investors are now eyeing potential pain at a 6% level for the 10-year Treasury yield, which could further destabilize financial markets and corporations.

In response, US 30-year mortgage rates have surpassed the pre-war levels and are now around their highest in two years. The 10-year yield has increased by 0.70 percentage points since the Federal Reserve's June policy meeting and by 1.25 percentage points since early March. This rise in yields has been primarily fueled by rising Federal Reserve expectations, with the remaining increase attributed to higher growth expectations and oil prices.

Strong US growth and rising inflation pressures have raised the likelihood of further Fed rate hikes. This situation is reflected in the bond market's repricing, as the 30-year yield represents investors' willingness to finance government borrowing in the years ahead. While shorter-dated Treasury yields are influenced by expectations for interest rates, the 30-year yield is a measure of the willingness to fund future government borrowing.