Anthony Saglimbene, chief market strategist at Ameriprise Financial, said for many of the last 15 years, investors operated in a market where stable-to-falling interest rates consistently supported higher stock prices.
"However, last week's Treasury auctions were a reminder that the landscape is shifting," he said.
"When it comes to longer-dated Treasury issuance, investors are increasingly focused and concerned about the growing amount of U.S. debt and America’s lack of fiscal discipline."
Higher yields pressure global bond markets
Vasu Menon, managing director of investment strategy at OCBC, said competition for capital from AI hyperscalers, rising U.S. budget deficit along with Fed Chairman Kevin Warsh’s departure from transparency to an opaque policy stance, are all contributing to higher Treasury yields.
"Rising long U.S. bond yields is a risk that investors must bear in mind going forward... bond investors are best placed to manage this risk by focusing more on shorter duration bonds," Menon said.
The bond selloff also spread to Japan and Europe with Japan's benchmark 10-year government bond yield JP10YTN=JBTC rising to a 30-year peak.
Germany's bund futures FGBLc1 and French OAT futures FOATc1 dipped in Asian hours. Germany's 10-year Bund yield DE10YT=RR touched its highest level since May 2011 on Monday, while France's 10-year yields FR10YT=RR hit a 17-year high.
Inflation, fiscal worries and debt issuance in focus
Investors are worried about inflation risks, especially with the critical Strait of Hormuz remaining effectively shut and the talks to end the U.S.-Iran conflict at an impasse.
Iran said it would shift to a "fully offensive" military posture because efforts to negotiate a permanent end to the war have stalled, a senior Iranian official told Reuters as Washington ruled out extending their June ceasefire agreement.
Two recent Treasury auctions also drew attention for their yields as the sale of 10-year notes cleared at a high yield of 4.683%, the highest in 19 years, while the 30-year bond auction stopped at 5.216%, a 25-year peak.
30-year Treasury yield hits 19-year high
SINGAPORE, Aug 18 (Reuters) - U.S. 30-year Treasury yields hit their highest level since 2007 on Tuesday as stalled talks to end the U.S.-Iran war and fears of an imminent escalation sent oil prices higher, fanning inflation worries.
Rising concerns over fiscal spending amid increasing debt issuance are also weighing on the bond markets even as investors digest recent run of soft U.S. economic data that has led to traders scaling back rate hike expectations.
The yield on the benchmark U.S. 10-year Treasury note US10YT=RR rose to as much as 4.735% before settling at 4.729%. The yield on the 30-year bond US30YT=RR touched 5.321% in Asian hours, hitting its highest level in 19 years.
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