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BLOOMBERG
The selloff in US Treasuries extended into a third straight day, with 30-year yields touching 5% for the first time since 2007 and sending global financial markets into a tailspin.
As conviction grew that US interest rates could rise further from current 22-year highs, 10-year Treasury yields also climbed closer to the key 5% threshold. That pushed the MSCI all-country equity index into a fourth day of declines and to the lowest since May.
European stocks erased early losses to trade little changed and US index futures were slightly lower after the S&P 500 index dropped to a four-month low.
The latest leg of the selloff has been fuelled by the better-than-expected US job data, as well as a slew of hawkish comments from Federal Reserve officials.
Markets are pricing a one-in-three chance of a November hike and see a more than 50% likelihood of a move in December. “The bond selloff was triggered after peak rate hopes vanished into thin air for the moment,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “The fear of higher yields in the future has forced investors to sell and — no surprise — the crowd runs toward a small door.”
Ten-year Treasury yields, the benchmark for the global cost of capital, have risen about 30 basis points. Bonds globally have followed suit, with Japan’s five-year borrowing costs rising to a decade high and yields on Chinese investment-grade dollar credit touching an 11-month peak. In Europe, German yields rose about 5 basis points to the highest since 2011.
And the impact of the bond rout has rippled across asset classes. US crude futures slipped back below $89 a barrel, and global currencies buckled under the dollar’s renewed strength.