U.S. 30-year Treasury yield hits highest level since 2007 amid global bond sell-off

By Jamie Chisholm

Concerns about inflation and more debt supply is hitting the fixed income sector

Treasury yields are rising

The sell-off in global bond markets continued early Tuesday, pushing many benchmark borrowing costs to multi-year highs amid concerns about inflation, government budget deficits and increased supply of debt.

The yield on the U.S. 30-year Treasury BX:TMUBMUSD30Y, known as the long bond, which is particularly sensitive to rising inflation, is up nearly 2 basis points to 5.234%, its highest level since June 2007.

The U.S. 10-year Treasury yield BX:TMUBMUSD10Y was up 1.4 basis points to 4.740%, near its highest level since the start of 2025.

Similarly, the 10-year Japanese government bond yield BX:TMBMKJP-10Y rose above 2.950% for the first time since September 1996, while the similar duration German bund yield BX:TMBMKDE-10Y traded at 3.270%, near its highest mark since early 2011.

The rise in yields, which move inversely to the bond price, come as fixed income investors face a number of challenges.

The U.S.-Iran war has pushed up oil prices (CL.1) and is stoking inflationary pressures, which eat into the returns bonds offer.

"Higher oil prices feed into headline consumer price inflation through gasoline and energy costs, but the bigger issue is second-round risk. If firms are already facing rising input costs, depleted inventories and resilient demand, a renewed energy shock makes it easier for price pressures to broaden," said Patrick Munnelly, strategist at Tickmill Group.

U.S. annual consumer price inflation is 3.4%, above the Federal Reserve's 2% target. However, some investors sense a reluctance by new Fed Chair Kevin Warsh to increase official interest rates in order to tackle the price pressures, a belief that is also encouraging traders to sell longer duration paper.

Meanwhile, the market may also be becoming more concerned about the high budget deficits of many developed nations, which may need to be serviced by increased supply of debt.

"Rising long-dated bond yields are not driven solely by expectations of higher interest rates and inflation fears. They can also reflect concerns around high levels of government borrowing and investors demanding greater compensation for the risks of holding long-dated government bonds," said Dan Coatsworth, head of markets at AJ Bell.

The U.S. Treasury Department reported on Monday that nearly all major foreign holders of U.S. debt reduced their holdings in June.

Among other concerns on supply are the mammoth sales of debt by some big tech companies in recent months as they raise funds to pay for their large investments in AI.

Goldman Sachs recently said it expects bond issuance by the five hyperscalers (Amazon, Alphabet, Meta, Microsoft, and Oracle) to reach roughly $250 billion this year and $400 billion in 2027.

A lot of this debt is in longer duration assets that may compete with government paper of a similar tenor, say analysts. "For Treasury, the sheer amount of duration supply forced onto the market, notably at the long-end, should be a concern," said Jonathan Cohn, head of U.S. rates desk strategy at Nomura in reference to hyperscaler bond sales.

Ed Yardeni, founder of Yardeni Research, summarized the market's concerns in commentary shared with MarketWatch. "The U.S. now pays $1 trillion a year in interest on its $40 trillion federal debt. The Fed is waiting to see if inflation will continue to fall on its own. The Bank of Japan is on the verge of more rate hiking. The outlook for oil prices remains uncertain. That has global bond investors pushing up bond yields higher," he said.

However, he added that "we are not pushing the panic button" as he recalled that that during the summer of 2023, the U.S. bond yield soared from 4.00% to 5.00% in three months from August through September.

"At 5.00% on November 1, the bonds turned out to be a great buy. There could be a similar buying opportunity ahead in the bond market," Yardeni said.

The surge in bond yields was also impacting equity markets early Tuesday, with S&P 500 E-mini futures (ES00) sliding 0.5%.

-Jamie Chisholm

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08-18-26 0658ET