US 30-year Treasury yields climbed to their highest level since 2007 on Tuesday as rising oil prices, stalled US-Iran peace talks and mounting concerns over government borrowing rattled global bond markets.
The yield on the 30-year Treasury bond rose to 5.327%, its highest level in 19 years. The benchmark 10-year Treasury yield increased 1.7 basis points to 4.739%. The surge came despite softer US economic data, which has prompted traders to reduce expectations for further interest-rate hikes.
The latest bond selloff reflects a growing concern that inflation and fiscal risks could keep long-term borrowing costs elevated.
Oil Prices Add to Inflation Fears
Oil prices moved above $90 a barrel as hopes for an end to the US-Iran conflict weakened. Negotiations have stalled, while Iran has indicated it could adopt a “fully offensive” military posture. Washington has also ruled out extending the June ceasefire agreement.
The Strait of Hormuz remains effectively shut, keeping uncertainty around global crude supplies high. A prolonged disruption could push energy prices higher and make it harder for inflation to ease.
That creates a difficult environment for bond investors. Softer economic data may support expectations for lower rates, but higher oil prices could keep inflation pressures alive.
Also Read: US Presses Fresh Sanctions On Iran To Choke 'Shadow Fleet', Cut Access To Global Trade
US Debt Adds Pressure
Investors are also becoming increasingly concerned about the scale of US government borrowing.
The US national debt is approaching $40 trillion, while the fiscal deficit remains large. The sheer volume of debt that needs to be financed in the coming years is prompting investors to demand higher returns.
Recent Treasury auctions reinforced those concerns. The latest 10-year Treasury auction cleared at a 4.683% high yield, the highest in 19 years. The 30-year bond auction stopped at 5.216%, a 25-year high.
Investors are also facing competition for capital from major AI companies. AI hyperscalers are borrowing heavily to fund expansion, adding to the supply of bonds competing for investor money.
Global Bond Markets Under Pressure
The selloff has spread beyond the US.
Japan's benchmark 10-year government bond yield reached a 30-year peak, while Germany's 10-year bond yield recently touched its highest level since May 2011. France's 10-year yield also reached a 17-year high.
Vasu Menon of OCBC said rising AI-related borrowing, the U.S. budget deficit and uncertainty around Federal Reserve policy were contributing to higher Treasury yields.
The rise in long-term yields marks a significant shift for markets that spent much of the past 15 years benefiting from stable or falling interest rates.
With U.S. debt nearing $40 trillion, investors are increasingly questioning how much borrowing the market can absorb without demanding still higher returns.
Also Read: High Rates, Weak Demand: 6.77% Mortgage Rates Are Keeping US Homebuyers On The Sidelines
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