Bonds bomb as yields hit multi-decade highs
TLT•Government bond yields surged after business activity accelerated and input prices continued rising, stoking expectations for more central bank rate hikes. The U.S. 30-year Treasury yield reached a 22-year high, while yields on five-year notes topped 5%.
1. Yields climb worldwide
U.S. and global government bond yields rose to multi-decade highs after business activity in the United States and Europe accelerated at its fastest pace in years last month, while input prices continued to rise. Markets priced in a two-thirds chance of another Federal Reserve and European Central Bank rate hike in October. Fed officials Michael Barr and John Williams said more tightening would likely be needed; the U.S. 30-year Treasury yield reached its highest level in 22 years.
2. Debt and oil add pressure
Poor demand for a $70 billion sale of five-year Treasury notes sent their yields above 5% for the first time since 2007. The OECD warned about rising government debt, and the Institute of International Finance put the global government debt servicing bill above $3.5 trillion. Oil prices also returned to triple-digit territory.
3. SoftBank raises bond funding
SoftBank raised $11.1 billion through dollar- and euro-denominated bonds, the largest global high-yield corporate bond sale on record, to help fund its investment in OpenAI. Its five-year credit default swap spread exceeded 400 basis points this week, up from around 280 basis points in June.
