Global Bond Rout Drives 10-Year Treasury Yield to 24-Year High of 5.34%

A deepening global bond sell-off pushed the 10-year US Treasury yield to 5.34% on Thursday, its highest level since April 2002, while the 30-year Treasury bond yield also touched a 24-year peak before pulling back to around 5.61%. The rout extended well beyond US borders, with UK gilt yields reaching their highest since 1998 and the French-German 10-year bond yield spread widening to 134 basis points, its widest in 14 years.

A sharply higher September US ISM Manufacturing PMI prices component added fuel to the sell-off, reinforcing fears that inflation remains sticky. Markets are now pricing a 90% probability of a 25-basis-point Federal Reserve rate hike in December. HSBC economist Liz Martins told Reuters the sell-off reflects a broader loss of confidence in governments' ability to rein in debt, while Capital Economics chief markets economist Jonas Goltermann described it as "demanding higher compensation for holding long-dated debt" in a world of greater fiscal, geopolitical and policy uncertainty.

Drivers cited across markets include soaring energy costs feeding inflation, the surge in AI and data-center investment intensifying competition for capital, and persistent worries about ballooning government deficits. Higher yields raise borrowing costs for mortgages, auto loans and corporate debt, and force governments to spend more on interest payments. In currency markets, the yen outperformed its G10 peers as traders unwound carry trades, and the Swiss franc saw a notable bid. Stocks remained close to August record highs even as bond yields hit multi-decade levels, though strategists flagged growing questions about how long that divergence can hold.