The global bond selloff deepened on Thursday, with the US 30-year Treasury yield climbing above 5.4%, its highest level since 2004, and the 10-year yield pushing past 5.1%, a level last seen in 2007. The move extended a rout that has now run for weeks and is pushing borrowing costs higher across the developed world.
Equity markets struggled to absorb the shift. The S&P 500 and Nasdaq closed nearly flat while the Dow fell, according to MarketWatch, as higher Treasury yields raised the discount rate on future earnings and squeezed valuations. The 10-year yield settled Thursday around 5.163%, per the same report.
What is driving the rout
Three forces are compounding. First, energy. Brent crude has been trading above $100 a barrel at points this month as the US-Iran war keeps shipping through the Strait of Hormuz restricted, and sustained high oil feeds directly into inflation expectations. Second, growth. US economic data has stayed strong, including a firmer-than-expected jobs report earlier this month, which argues against the Federal Reserve easing policy any time soon. Third, supply. Weak demand at a recent Treasury auction rattled a market already digesting heavy government issuance.
The Fed raised rates by a quarter point earlier this month and signaled another increase to come, under new chair Kevin Warsh, whose Jackson Hole speech in August committed the central bank to fighting inflation. Markets have since repriced the rate path higher, and long-dated yields, which are most sensitive to inflation and fiscal expectations, have done most of the moving.
The global dimension
The selloff is not confined to Treasuries. UK 30-year gilt yields have reached their highest since 1998, Japan 10-year yields have traded at levels not seen since 1996, and Italian BTP yields hit their highest since 2023 earlier in the month. As US yields rise, they pull global rates with them, and countries with weaker fiscal positions feel it most.
For governments, the arithmetic is getting harder. Higher long-term yields raise the cost of new borrowing and the interest bill on existing debt at refinancing. In the UK, the pressure lands on a government facing its first Budget next month. In the US, the debate over deficits has been sharpened by the same numbers.
What it means for markets
For equities, the pain is uneven. Companies with heavy debt loads and unprofitable growth stories are hit hardest by a rising cost of capital, while cash-rich businesses are more insulated. The Nasdaq had set records as recently as Tuesday before the bond market turned, and the reversal has been quick.
For crypto, the correlation has been visible. Bitcoin slid from above $86,000 to below $84,000 this week as rate-hike expectations firmed, even as spot bitcoin ETFs continued to take in money. Risk assets across the board are repricing to a world where money is no longer cheap.
For households, the pass-through arrives through mortgages and other loans, which track long-term yields with a lag. The 10-year yield above 5% puts upward pressure on borrowing costs that consumers feel within months.
The oil connection
Energy is the thread that ties the story together. The US-Iran war has kept commercial transit through the Strait of Hormuz limited for months, with war-risk insurance pricing most operators out of the route. Brent crude has swung between roughly 95 and 102 dollars this month, up more than 20 percent over the past month at one point, and every week of elevated oil feeds into headline inflation readings that central banks cannot ignore. The Swiss National Bank, which left its policy rate at zero on Thursday, still lifted its inflation forecast and cited energy prices from the conflict as the reason its outlook had worsened.
The transmission to bonds runs through expectations. If oil stays high, inflation stays high, and if inflation stays high, the Fed hikes again. Long-dated bonds price the whole path, which is why the 30-year has moved more than the front end. Traders describe the market as one-way at the moment: weak auctions get punished, strong data gets punished, and rallies get sold.
Credit markets feel it too
Corporate borrowers are watching the same move with concern. Investment-grade issuance has held up, but spreads have begun to widen at the long end as treasury yields rise, and leveraged borrowers face a harsher reset. Real estate is the most exposed sector, since property valuations depend on cap rates that move with long bonds. Commercial mortgage refinancing at current yields means higher debt service on the same assets, and that pressure builds with every 25 basis points.
Banks are caught in the middle. Higher long rates mark down the value of bond portfolios held at many regional lenders, a repeat of the dynamic that took down Silicon Valley Bank in 2023, though today the holdings are better hedged. Deposit costs also rise as the rate environment tightens, squeezing net interest margins from both directions.
What comes next
The open question is whether the selloff has further to run. Relief rallies have appeared when oil pulled back or when Fed speakers sounded a softer note, but the underlying drivers, expensive energy, strong growth and heavy issuance, have not gone away. Bond investors are now pricing a Fed that keeps hiking, not one that pivots.
Historical context is sobering. The last time the 30-year yield traded at these levels, in 2004 and 2007, the economy was in a different configuration entirely: younger demographics, lower debt loads and a pre-crisis credit boom. Today the debt is larger, the buyer base more fragile, and each increment in yield adds to the fiscal strain. Markets are adjusting to that reality in real time, and no central bank has shown an appetite to stop them.