US Treasury Yields Hit Multi-Decade Highs as Global Bond Selloff Deepens

US borrowing costs climbed to their highest levels in decades on Thursday as a relentless selloff in government bonds deepened, with the 10-year Treasury yield settling at 5.163% — its highest closing level since July 2007, according to Dow Jones Market Data cited by MarketWatch.

The 30-year yield rose to 5.460%, its highest since June 2004, as the Treasury’s attempts to calm the market fell flat. The department bought back just $4.1 billion of long-dated bonds on Thursday — well short of the $6 billion maximum it had set — while a $44 billion auction of seven-year notes drew a high yield of 5.085%, the dearest for that tenor since April 1993, The Wall Street Journal reported.

Traders blamed stubbornly strong economic data and rising conviction that the Federal Reserve, which lifted rates earlier this month under new chair Kevin Warsh, will tighten again at its October meeting. Philadelphia Fed President Anna Paulson said further tightening may be warranted, and New York Fed President John Williams called another increase by year-end “reasonable”.

Surging energy prices added to the inflation fears, with Brent crude above $100 a barrel amid Houthi attacks and the dispute over the Strait of Hormuz. Higher yields are squeezing stock valuations — the Dow slipped, while the S&P 500 and Nasdaq closed near flat.

Sources

• Reuters — Dollar set for weekly gains as yields surge, Fed bets build
• The Wall Street Journal — U.S. Treasury Yields Hit Multiyear Highs
• MarketWatch — Why investors aren’t buying the Treasury’s bond-market calm bid