The 10-year US Treasury yield rose to its highest level in nearly twenty years Tuesday, marking another stop in a tough global bond selloff driven by rising energy costs, growing debt, and inflation.
The yield rose as much as four basis points to 5.02% on Tuesday, surpassing its 2023 peak and reaching the highest level since 2007. The latest leg of the move followed an increase in global oil prices as risks to Middle East supplies grow.
The bond market decline increases the pressure before the Federal Reserve’s decision on interest rates on Wednesday.
Investors expect officials to raise short-term borrowing costs for the first time since July 2023. If they do not hike rates, or if Fed Chairman Kevin Warsh signals less aggressive monetary tightening in the near future than markets expect, bond investors might demand higher yields to protect against inflation risk.
It also comes as the amount of debt governments issue continues to rise, both to refinance maturing bonds and to fund deficit spending. Central banks are no longer buying government bonds as part of their quantitative easing programs, and demand from other traditional buyers is cooling—resulting in greater reliance on more price-sensitive investors.
By CEO NA Editorial Staff
