The yield on the 30-year US Treasury climbed to 5.61%, its highest level since June 2002, as a bond sell-off deepened on Tuesday. Rising oil prices and strong economic data are pushing investors to price in further Fed rate rises, while stocks and corporate credit have so far held steady.
Long-dated yields extend their climb
US long-term borrowing costs rose to their highest level in almost a quarter of a century on Tuesday as the recent Treasury sell-off deepened. The 30-year yield gained 0.06 percentage points to 5.61%, a level last seen in June 2002.
The 10-year yield also moved higher, adding 0.04 percentage points to 5.28%, a fresh post-2007 high. Bond yields rise as prices fall, and the moves mark a deepening of a sell-off that has built momentum in recent weeks.
Oil and rate bets drive the sell-off
Surging oil prices are fueling inflation concerns, and strong US economic data has bolstered bets on further rate rises from the Federal Reserve. Treasury secretary Scott Bessent's mid-August move to expand long-term bond buybacks has failed to stem the slide, with the 30-year yield rising from 5.2% when the program was announced.
According to the Financial Times: "The path of least resistance appears for the term premium to blow out further", said Arun Sai, a multi-asset strategist at Pictet Asset Management. Kristina Hooper, chief market strategist at Man Group, pointed to growing concern about fiscal sustainability as well as inflation tied to the energy crisis sparked by the US-Iran war. The US national debt passed $40tn last month, adding to investor unease over the country's fiscal trajectory.
Laura Cooper, head of macro credit at Nuveen, said the long end of the curve has little protection against another bout of turbulence while near-term inflation risks stay tilted higher with energy prices elevated. Brent crude has traded above $100 a barrel for much of September, easing slightly to about $104 a barrel on Tuesday.
Stocks hold up despite the bond rout
Despite the bond sell-off, riskier assets have stayed relatively resilient. The S&P 500 slipped 0.3% on Tuesday, remaining just 2% below its August all-time high. The Nasdaq 100, meanwhile, added 0.2%.
Cooper attributed the resilience in risk assets to a strong growth backdrop, powered in part by AI investment.
Source: Financial Times
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