- The 30-year U.S. Treasury yield hit 5.18%, highest since 2007 financial crisis
- Rising inflation, crude prices, and US deficits fueled the surge in Treasury yields
- Middle East tensions increased oil price volatility and fears of energy-driven inflation
The yield on the 30-year U.S. Treasury bond surged to 5.18% on Tuesday, reaching its highest level since the eve of the 2007 global financial crisis.
The sharp surge comes on the back of mounting investor angst amid stubborn inflation, surging crude prices and expanding US government budget deficits. This is coupled with tensions in the Middle East, a key factor driving the volatility in oil prices, which in turn, has sparked fears of a energy-driven inflation.
The broad sell-off in long-term debt has pushed yields — which move inversely to bond prices — significantly higher across the curve. The 10-year Treasury yield also climbed, reaching 4.66%, its highest level in over a year.
"The surge reflects the fact that west asia crisis has lasted longer than market expectation. This will put further upward pressure on global energy prices as supply disruptions are expected," said Gaura Sengupta, Chief Economist, IDFC FIRST Bank.
She added that high yield levels in the US implies that globally foreign inflows will remain low.
The 30-year yield heavily influences fixed mortgage rates, raising concerns that elevated borrowing costs could cool the housing market, dampen household consumption and slow the broader U.S. economy.
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