US 30-year Treasury yield rises to highest since 2002 on deepening debt market sell-off

On Tuesday, September 29, the 30-year Treasury yield climbed to 5.61 percent, marking its highest level since 2002. This surge occurred amidst a growing sell-off in global debt markets, driven by concerns over inflation and mounting corporate debt supply. Michael Cloherty, head of US interest rate strategy at CIBC Capital Markets, noted that the long-dated bonds appear relatively inexpensive compared to historical norms and that investors have yet to witness significant value-buying in the market.

The sell-off reflects a broader weakening in the US$32 trillion Treasuries market, which has been grappling with a months-long decline. Factors contributing to the market's turbulence include the impact of high oil prices, stemming from the conflict in the Middle East, on the global economy, and expectations of further interest rate hikes by central banks, particularly the US Federal Reserve.

However, Federal Reserve President John Williams suggested that only one additional rate increase might be necessary by the end of 2026 to curb inflation, moderating market expectations. Dan Carter, a senior portfolio manager at Fort Washington Investment Advisors, emphasized the contrast between Williams' comments and other Fed speakers who have been more urgent in advocating for further rate hikes.

The Treasury market's volatility is also exacerbated by the recent launch of a large bond sale by Paramount Skydance, totaling $52 billion, to fund the acquisition of Warner Bros Discovery. Despite the challenges, some analysts, like Jim Bianco, view the current market conditions as an opportunity to invest in Treasuries, while others, such as Chris Iggo, anticipate a rebound in bonds after a period of difficulties.

The seasonality of Treasuries typically sees a decline in September and October, a pattern observed so far in 2026, with the 10-year yield nearing its highest level since 2007.