US Treasuries came under renewed pressure Monday, pushing longer-dated yields to fresh multi-decade peaks as bonds extended their monthslong slide. The US 10-year Treasury yield rose to 5.326%, up from Friday's close of 5.276%, while the 30-year yield climbed to 5.683% from 5.629%. Both yields moved back towards the multidecade highs reached last week, with the two-year Treasury yield rising to 4.841% from 4.823%. A 30-year US Treasury yield above 6% is "inevitable" — and likely this month," as current bond-market volatility creates a cycle driving rates higher, Earl Davis, head of fixed income at BMO Asset Management, told Bloomberg TV on Monday. The long-bond yield hasn't been that high since 2000. The MOVE Index, the bond market's version of the VIX, has jumped 46% in June and is hovering around 116, close to its March high and the loftiest reading since April 2025. As per CoinDesk, this rising volatility in Treasury notes underpins global finance and can cause global financial tightening.
The global bond market has experienced unprecedented volatility, with US 10-year Treasury yields rising to 5.326%, their highest level since 2002. According to Investing.com India, this represents the biggest quarterly rise in yields this century for the three months ending in September. The Washington-based Institute of International Finance estimates that over the past year, advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds alone - more than the estimated $2.6 trillion of global spending on AI, $3.1 trillion on defense or $2.3 trillion on clean energy. Britain's 30-year government bond yield rose above 6% to its highest since 1998 on Thursday, while UK house prices are growing at their slowest rate in nearly two years, underscoring the effect of higher rates on the real economy. Corporate bond volatilities have both continued to climb with investment grade and high-yield vols jumping from 6th and 11th percentile lows 2 weeks ago to their 79th and 84th percentile highs respectively, as reported by Cboe.
France faces mounting pressure as its government presents a 2027 budget bill on Thursday, which could struggle to get unpopular belt-tightening measures through parliament. As reported by Investing.com India, France's government is near the top of bond investors' minds, with French 10-year borrowing costs hitting their highest since 2002 on Thursday, trading close to the symbolic 5% level after turning in its worst quarterly performance since 1987 in the September-ending quarter. The gap between French and German 10-year borrowing costs is trading around its highest since the euro zone debt crisis of the 2010s, and the cost of insuring France's debt against the risk of default is at its highest since 2013. The European Central Bank is even facing questions about whether it might help shore up France's bond market, though market players say this seems unlikely for now. Shinji Kunibe, who runs the global bond team at Sumitomo Mitsui DS Asset Management, sold all his French government bonds, with the money going into German bonds and short-term Japanese debt, though the size was not disclosed.
Spanish government bond yields also moved higher amid political uncertainty, with the 10-year Spanish yield rising 3.4 basis points to 4.119%, having reached 4.219% on Friday, the highest level since December 2013. The gap between Spanish and German 10-year yields widened to 66.10 basis points on Monday, though it remained below Friday's peak of 74.18 basis points. The move came after Spanish Prime Minister Pedro Sanchez called a snap election for next month following protests over rising housing costs. The election is scheduled for November 29, with recent opinion polls suggesting the vote could lead to a right-wing coalition between Spain's main conservative People's Party and the anti-immigration Vox party. The possibility of a change in government has created additional uncertainty for investors already watching Spain's economic and political situation closely.
Recent economic data continues to support the bond bearish outlook, with the Institute for Supply Management's purchasing managers index for US services companies coming in at 54.9 in September, down slightly from 55.4 in August. However, the reading remained above 50, indicating that the services sector is still growing. The ISM services figures for September showed the sector expanded at a slower pace, while prices paid beat forecasts and at a reading of 74 was the highest level since July 2022. Vail Hartman, strategist at BMO Capital Markets, noted that the overall tone "points to mounting inflationary pressures and strong nominal growth, reinforcing a central bond-bearish underpinning over the past several weeks." Interest-rate swaps showed traders priced in around a 25% chance that the Fed lifts benchmark borrowing costs at its October gathering, with a full quarter-point hike seen by the December meeting. This week's auctions of 10- and 30-year debt are seen providing a test of investor demand for longer-dated bonds as yields climb, with the coupon auction cycle beginning Tuesday with a $58 billion sale of 3-year notes.
According to Investing.com India, Britain has two key advantages over France: a fiscal rule mandating spending cuts or tax rises when higher debt interest threatens to breach it, and a political class deeply scarred by the 2022 crisis. UK homeowners typically fix mortgages for 2-5 years, while French borrowers often fix for over a decade, meaning UK households feel higher rates much faster. The mortgage market reinforces fiscal discipline, as British homeowners took much of the blame for higher mortgage rates in 2022. This political sensitivity is expected to influence the October budget, with the chancellor appearing reluctant to add fuel to the bond selloff fire. An index of junk bond credit default swaps hit its highest since early April, reflecting broader credit market concerns amid the global bond rout. As reported by Investing.com India, France faces mounting pressure to stop its deficit exceeding 6% of GDP next year, up from a projected 5.4% this year, while the UK deficit is set to fall to around 4% this year despite Iran war and bond-market pressure.
