US long-term borrowing costs touched their highest level in more than two decades on Thursday as oil jumped back above $105 (€92) a barrel, adding to inflation fears after the US Treasury market suffered its biggest fall since last year’s trade war sell-off.
Thirty-year US Treasury yields rose 0.06 percentage points to 5.46 per cent on Thursday, their highest since 2004.
Ten-year US Treasury yields rose to 5.17 per cent, up 0.05 percentage points to their highest since 2007. The moves followed a 0.15 percentage point jump on Wednesday as rising crude prices and strong economic data triggered bets on faster rate rises by the Federal Reserve. Bond yields rise as prices fall.
“There appears to be a lot of pain on the street in fixed income,” said Mohit Kumar of Jefferies, arguing that the yield rises had been exacerbated by hedge funds having to dump bets that short-term debt would outperform.
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A surge in yields since the Iran war has exacerbated worries about a glut in long-term debt supply amid record global issuance and big economies continuing to run big deficits, heating economies further.
This week’s sell-off in bonds has put stock markets under pressure, with the benchmark S&P 500 index down 0.5 per cent and the tech-heavy Nasdaq 100 falling 0.8 per cent on Thursday morning in New York.
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As the US Treasury sell-off rippled through Asian markets, Japan’s 10-year government bond yield rose 0.1 percentage points to 3.08 per cent, the highest level since 1996.
“We are in what I would call a correlated move higher in yields. There’s no escape,” said Eric Robertsen, head of global research and chief strategist at Standard Chartered in Singapore.
The 10-year Bund yield in Germany rose 0.06 percentage points to 3.61 per cent after jumping 0.1 percentage points on Wednesday.
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Yields on 10-year UK gilts rose 0.04 percentage points to 5.4 per cent, adding to their 0.11 percentage point jump on Wednesday. The bonds were later trading at yields of about 5.38 per cent.
Oil prices tracked by the global Brent marker rose 4.8 per cent on Thursday to $108 a barrel, adding to a 3.9 per cent jump on Wednesday after both the US and Iran struck a defiant tone at the UN General Assembly.
“For investors, the sense was that the two sides were still far apart,” said Henry Allen, macro strategist at Deutsche Bank. “It was clear that investors were still expecting a protracted period of higher oil prices.”
“Collectively, that strong [economic] data and the oil rebound led to growing speculation about faster rate hikes,” Allen said.
Higher bond yields mean the cost of borrowing for governments is rising at a time when they are aggressively increasing spending. On Wednesday, the Organisation for Economic Co-operation and Development (OECD) warned that surging bond yields were a “major concern” for countries’ public finances.
“It’s this combination of fiscal risk made worse by political uncertainty,” Robertsen said. “You’re now in this negative feedback loop.”
Wednesday’s surge in US yields came after data showed American business activity accelerated at the fastest pace in five years this month.
“There’s been a big change,” said Andrew Pease, Asia-Pacific head of investments for Russell Investments. “The Fed has started to tighten. Markets are jittery because there’s been big changes in expectation about the drivers of the US economy.” – Copyright The Financial Times Limited 2026
