US Treasuries: Cold War yield parallels – Rabobank
Rabobank’s RaboResearch Global Economics & Markets notes that US Treasury yields ended Q3 sharply higher, with 10-year and 30-year yields reaching levels last seen in 2002. The report highlights concerns from major market commentators about bonds and equities, and warns that another phase shift higher in long-dated US yields could take them into ranges seen during the late Cold War period.
Rabobank's RaboResearch Global Economics & Markets has reported that US Treasury yields reached levels not seen since the late Cold War in Q3. The 10-year and 30-year yields spiked to levels last observed in 2002. While 2-year yields remained stable at 4.89%, 10-year yields increased by 5 basis points to 5.30% and 30-year yields rose by 6 basis points to 5.63%, marking their highest levels since June 2002.
French 30-year yields also rose by 9 basis points to 5.46%, widening the spread over Bunds to 152 basis points. Market commentators, including Bill Gross, have warned of a potential "vicious loop" of selling and urged caution in both bonds and stocks. Should US 30-year yields rise further to the 7.25-8.00% range reminiscent of the late Cold War era, it could significantly impact bond markets.
While US inflation data tempered expectations for another Federal Reserve rate hike, oil-driven inflation fears continue to support elevated bond yields. Meanwhile, geopolitical tensions between the US and Iran have bolstered demand for the US Dollar, further driving yields higher.
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