A brutal global bond rout pushed US Treasury yields to their highest point since 2002 on Thursday, intensifying the pressure from the oil price shock on public finances around the world.
Yields on 10-year Treasuries climbed as much as 0.04 percentage points to 5.34 per cent, a level last seen almost a quarter of a century ago, as traders warned that the $32 trillion (€28 trillion) US government bond market, an anchor for global finance, was caught in a “vicious loop” of selling. Yields fell back to 5.29 per cent later on Thursday, roughly flat on the day.
UK 30-year gilt yields climbed above 6 per cent on Thursday for the first time since 1998, before easing to 5.94 per cent.
“Inflation, deficit and issuance concerns continue to weigh on the bond market,” said Mohit Kumar, an economist at Jefferies, adding that investors are wary of stepping in to the market given the volatility.
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Investors have warned that yield jumps in recent trading sessions have been exacerbated by hedge funds and other big investors who have been forced to ditch long-term debt to counteract the effect of rising rates on their broader debt portfolios or to unwind loss-making trades as the market has sold off.
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“You’ve got to a position where lots of people are getting stopped out of long positions or thinking: I don’t want to hold this as [the yield] keeps going up,” said Mike Bell, head of market strategy at RBC BlueBay Asset Management.
Brent crude, the international oil benchmark, rose 2.4 per cent to $100.37 a barrel, intensifying inflation worries.
In a sign of the wide swings in sentiment, France’s 10-year yield rose as much as 0.1 percentage points to 4.96 per cent, its highest level in nearly a quarter of a century, before falling back to 4.81 per cent, down 0.05 percentage points on the day.
European stocks fell as investors fretted over possible fallout from higher yields. The region-wide Stoxx Europe 600 stock index was down 0.6 per cent and the FTSE 100 fell 1.2 per cent.
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But in the US, futures tracking the S&P 500 were up 0.3 per cent and the Nasdaq 100 was set to rise 0.68 per cent at the New York open. Wall Street stocks have so far been relatively resilient to the sell-off in debt, buoyed by investors’ bullishness about the artificial intelligence (AI) theme.
Harriet Ballard, a portfolio manager at Aviva Investors, said she remained positive on the equity market, despite the pressure from higher interest rates, because “AI-linked sectors have been better insulated by strong earnings”.
Bond markets have for months been racked by fears over the spectre of higher inflation triggered by the Iran war energy shock, which has pushed the relationship between oil prices and Treasury yields to its tightest point since 1990. This has been intensified by robust US economic data that has further fed expectations of higher interest rates.
Traders are braced for further swings, with the Ice BofA Move index of implied volatility in Treasuries approaching the high reached in the first weeks of the conflict.
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As the bond worries spread through Asian markets, Japanese bond yields rose 0.04 percentage points to 3.1 per cent, close to a multi-decade high.
Mitul Kotecha, head of Asian foreign exchange and emerging markets macro strategy at Barclays, said the pressure on Japanese bonds was down to “a combination of the contagion of what’s happening in the US market and, to some extent, uncertainty about [the Bank of Japan] tightening [rates]”.
“It’s the fiscal concerns that continue to play in the market,” he added.
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Corporate credit spreads have also widened in recent days as investors worry that the volatility in government bond markets could spread into the credit markets that determine companies’ borrowing costs.
The additional interest rate paid by European investment-grade companies over government bond yields has ticked higher to almost 0.9 percentage points this week, the highest level since April, according to Ice Bank of America data. “There is a risk that credit spreads follow [yields higher],” said Andrew Jackson, head of investment at Vontobel Asset Management.
Inflation data in several European countries – including Germany, France and Italy – on Wednesday showed higher price pressures than analysts had expected, adding to investors’ fears that the energy price shock is feeding through into economic strain, although US data showed a drop in the Federal Reserve’s preferred inflation measure.
Investors have been struck by a relentless march higher in global bond yields where problems in each market, including Japan, France and the US, are feeding off each other.
“As [yields] move up, they are pulling each other up,” said Guy Miller, chief market strategist at Zurich. – Copyright The Financial Times Limited 2026
