Battered bond market braces for a new era of interest rates
TLT•Global bond markets are heading for their worst month in years as energy costs fuel inflation and AI investment lifts growth. Two-year U.S. Treasury yields have surged nearly 60 basis points in September, while 10-year yields have risen around 50 basis points and topped 5%.
1. Yields climb sharply
Two-year U.S. Treasury yields have surged nearly 60 basis points in September, putting them on track for their biggest monthly jump since early 2023. Ten-year Treasury yields have moved above 5% for the first time since 2007 and are poised for their largest monthly increase since 2022. Yields have also jumped in France, Germany, Britain and Australia, while Japanese government bond yields are near multi-decade highs.
2. Investors weigh risks
Rising energy costs, inflation and stronger growth linked to AI investment are contributing to expectations that interest rates will stay higher for longer. Some investors see higher yields as making government bonds more attractive, while others are cautious about long-dated bonds because of high government debt. The value of bond sales by large technology companies has more than doubled this year to over $200 billion, and October will bring U.S. jobs and inflation data, French budget talks and a UK budget.
