The yield on the 30-year Treasury bond climbed to its highest level in 22 years on Thursday as a global selloff in government debt rolled into a third session, driven by rising energy costs, resilient US growth data and mounting unease over sovereign borrowing.
The long bond rose as much as six basis points to 5.46% intraday, the highest since 2004, according to Reuters. The Treasury Department's official par yield curve put the 30-year at 5.47% at the close, up from 5.29% on Tuesday — an 18 basis point move in two sessions. The 20-year yield finished at 5.53%, the highest point on the curve.
The Long End Is Doing the Work
What distinguishes this leg of the selloff is where it is concentrated. The two-year yield, most sensitive to Federal Reserve policy expectations, closed at 4.87% Thursday, up from 4.71% Tuesday. Over the same stretch the 30-year rose slightly more. The 10-year settled at 5.10% after touching 5.158% intraday, its highest since 2007.
That pattern — long rates rising at least as fast as short rates — points to something beyond a repricing of the Fed's next move. It suggests investors are demanding more compensation to hold duration at a moment when supply is heavy and the inflation outlook is unsettled.
"Obviously the higher things go, the worse everything looks, and the more expensive US mortgages will be, for example, and the bigger the debt interest burden of the federal government," said Chris Scicluna, head of economic research at Daiwa Capital.
The move was not confined to the United States. Germany's 10-year Bund briefly exceeded 3.5%, a 17-year high, and Japan's 10-year reached its highest level since 1996. Germany has forecast borrowing of €525.5 billion ($598 billion) in 2026.
"Treasuries are competing with the rest of the market to be purchased, and so the question is, how much higher could it go?" said Hank Calenti, global markets strategist at SMBC EMEA.
Equities Barely Flinched
The striking part of Thursday's session was the stock market's response, or lack of one. The S&P 500 closed at 7,704.23, down 1.80 points, or 0.02%. The Nasdaq Composite finished at 26,939.37, up 3.34 points. The Dow Jones Industrial Average fell 161.70 points, or 0.31%, to 51,349.89, and the Russell 2000 slipped 0.11% to 2,835.65.
Indexes had been meaningfully lower earlier in the day before recovering. The turn came after Reuters reported that US and Iranian negotiators were working on a phased deal to reopen the Strait of Hormuz. Oil futures rose more than 2% on the report — which, in the near term, added to the inflation pressure weighing on bonds even as it lifted equity sentiment.
"Not a crisis but an eye-opener," said Rick Rieder, BlackRock's chief investment officer of global fixed income, who graded equities a B- against the backdrop.
Dave Aspell, co-chief investment officer at Mount Lucas Management, was blunter about the bond move: "It's rare you get a move like this in bonds."
The dollar index firmed to 101.184, up roughly 0.6%. New York Fed President John Williams has described the US economy as showing "remarkable resilience" — the sort of strength that, for bondholders, is now the problem rather than the reassurance.
Sources: U.S. Department of the Treasury Daily Par Yield Curve Rates; Reuters (via GV Wire); Bloomberg; Yahoo Finance; CNBC