A widespread selloff across global sovereign bond markets deepened on Tuesday, pushing long-dated yields to fresh multi-decade highs and rattling stocks. Oil also hit a three-week high, an inflationary signal investors are struggling to ignore.
The selloff hit Japan hardest, where the 10-year JGB yield climbed to a 30-year high of 2.945%. In the U.S., the 10-year Treasury yield reached 4.7480%, its highest level since January 2025, while the 30-year yield rose to 5.33%, the highest in 19 years. Oil's move to a three-week high adds to inflation worries already weighing on the bond market.
Yield curves steepen as investors reassess risk
The U.S. 2s/30s curve became its steepest since April, and the spread between the 30-year yield and the fed funds rate is now the widest in four years. The curve had been negative during 2023 and 2024, and one view holds the steepening is simply a return toward longer-term averages rather than a cause for concern. Still, the pace of the adjustment, rather than its direction, is what concerns investors watching public finances and interest rate risk.
Stocks slide as tech leads losses
Equity markets moved lower in step with bonds. South Korea fell 1.5%, and Japan dropped 2.5%. Europe slipped 0.6%, while the UK closed flat.
In the U.S., the Dow fell 0.2% and the Nasdaq dropped 1.3%. On the S&P 500, seven sectors fell and four rose.
Tech dropped 2%, while healthcare and energy each gained 1.7%. The Philadelphia semiconductor index fell 5%. Among individual names, Johnson & Johnson rose 3.3% and Caterpillar fell 4.6%.
In currencies, the dollar held flat against soft U.S. data, but USD/JPY moved back up toward 160.00. Gold fell 1%, even as oil touched its three-week high.
Record corporate issuance and a diesel-market first
Some analysts point to surging corporate bond issuance as a factor crowding out demand for sovereign debt. Issuance has totaled almost $1.7 trillion so far this year, up around 27% from the same period a year earlier and on pace to beat last year's record of $2.2 trillion. August has already outpaced July's total.
Separately, the U.S. diesel crack spread surged above $100 a barrel for the first time ever, a sign of the strain rippling through refining and energy markets as supply disruptions persist.
Source: Economy News (Investing.com)
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