The global bond selloff rolled into a second day on Thursday, pushing the US 30-year Treasury yield to its highest level since 2004 and keeping equities under pressure on both sides of the Atlantic. The 30-year climbed to just over 5.4% intraday while the benchmark 10-year yield touched 5.14%, extending a rout that began with strong US data and high oil prices.
The 10-year yield surged as much as 16 basis points on Wednesday to above 5.12%, its highest level since July 2007, before settling near 5.11% on Thursday. The 5-year yield crossed 5% for the first time since 2007, and the move accelerated after a weak $70 billion auction of five-year notes showed thin demand at current price levels. Traders are now pricing in further Federal Reserve hikes over the next year rather than cuts, a reversal of positioning that dominated most of 2026.
Investors have absorbed rising yields so far given resilient growth, booming corporate profits and AI-led spending, but borrowing costs may be reaching a point where markets start to hit turbulence, Reuters reported.
Why yields keep climbing
The drivers are stacked. S&P Global’s private-sector activity data ran hot, with a PMI at a 62-month high, reinforcing the view that the economy does not need rate cuts. Brent crude traded above $100 a barrel, near $104.67 by mid-morning in New York, after earlier breaching that level on Middle East tensions, feeding directly into inflation expectations. Treasury Secretary Scott Bessent expanded the government’s bond buyback program in mid-August to ease pressure, but it has had little sustained effect on the market.
The selloff is global. Japan’s 10-year yield hit its highest level since 1996, and Australian and New Zealand bond yields jumped alongside European peers. The dollar held near a two-month high as currency traders priced the same hawkish path, and gold held losses as higher oil and hot US data strengthened the case for more tightening rather than less.
The mechanics of the move matter as much as the levels. Long-end yields are being driven by term premium, the extra return investors demand for holding duration risk, rather than by expectations of any single policy move. Weak auction demand signals that buyers want more compensation to absorb supply, and each weak auction makes the next one harder to place. That is the feedback loop that turns a data-driven repricing into a sustained rout.
Fiscal dynamics are doing their part. The US government is running large deficits at a point in the cycle when most countries would be consolidating, and the supply of long-dated debt keeps arriving into a market with fewer natural buyers. Foreign demand for Treasuries has softened as reserve managers diversify, and domestic buyers have shifted toward shorter maturities, leaving the long end thinner than it has been in decades.
Stocks wobble but hold
US stocks opened lower, with the Dow down about 0.3%, the S&P 500 off 0.4% and the Nasdaq Composite weaker still, before recovering much of the losses through a choppy session that ended roughly where it began. Oracle fell almost 5% after reports it invoked force majeure on a New Mexico data center project, raising concerns about delays in its data center buildout, and MGM dropped 10% at the open after Barry Diller’s People Incorporated withdrew its takeover offer.
The pain has been uneven. Equities had absorbed earlier yield rises thanks to resilient growth and the AI investment boom, and the Nasdaq closed at a record as recently as Tuesday. But the market’s tolerance is being tested: a jump in the 10-year yield of this size raises mortgage rates, corporate borrowing costs and the discount rate applied to every long-duration asset on the board. Growth stocks with distant earnings carry the heaviest load, which is why the Nasdaq has led on the down days even as it set records earlier in the week.
Housing is the sector where the pain shows up first. The 30-year mortgage rate tracks the 10-year Treasury with a spread, and at a 5.1% benchmark the mortgage rate sits well above 7%, a level that has historically frozen transaction volumes and put pressure on homebuilders. Builders have been buying down rates to keep sales moving, a margin hit that gets harder to justify with every basis point.
What traders are watching
Thursday’s calendar brings jobless claims and new home sales data that could either cool or confirm the inflation narrative. The Trump-Xi summit in Washington looms over everything, with a two-month trade-truce extension already announced and traders looking for anything beyond that. Costco and Darden headline the week’s heaviest consumer earnings slate, with options markets pricing outsized moves for both.
The bond market itself is the story to watch. Weak auction demand, a buyback program that has failed to calm the market, and rate-hike pricing that keeps building are the ingredients of a self-reinforcing selloff. History offers a cautionary reference: the last time the 10-year sat this high, in 2007, it marked the top of a credit cycle rather than the start of one, and the equity market’s reaction lagged the bond market by months.
There are offsets. Corporate balance sheets are stronger than in past tightening cycles, AI-driven capital spending is supporting growth in ways previous booms did not, and the Fed’s policy rate at 3.75% leaves more room to cut than in most historical episodes of long-end stress. Whether those cushions hold depends on how long the oil shock lasts and whether the inflation expectations embedded in long yields keep climbing.
For now, the resilience that carried equities through earlier yield spikes is intact, but the margin for error is thinner than it was a month ago. If the 30-year holds above 5.4% and the 10-year stays above 5.1%, the question shifts from whether stocks can shrug it off to how quickly consumers and companies feel the squeeze through mortgages, credit cards and refinancing walls.