Key facts
- Global bond markets experienced a widespread selloff, pushing yields higher.
- Long-dated U.S. Treasury yields reached multi-decade highs.
- Stock markets, particularly tech, declined amid rising bond yields.
- Oil prices reached a three-week high, signaling inflationary concerns.
- The U.S. diesel crack spread surged to an unprecedented $100 per barrel.
Global sovereign bond markets experienced a significant selloff on Tuesday, pushing long-dated yields to fresh multi-decade highs and rattling stock markets. Investors are also grappling with the inflationary signal from global oil prices hitting a three-week high.
The U.S. 10-year Treasury yield rose to 4.7480%, its highest level since January 2025, while the 30-year yield climbed to 5.33%, a 19-year peak. The U.S. 2s/30s curve steepened to its widest point in four years, reflecting investor concerns about inflation, public finances, and policymakers' ability to control them.
Analysts are debating whether the selling pressure on Treasuries is due to a 'crowding out' effect from surging corporate bond issuance, which is on track to set a record in 2026. Year-to-date issuance has reached nearly $1.7 trillion, up 27% from the same period last year.
In commodity markets, the U.S. diesel crack spread, a measure of refining profitability, surged above $100 a barrel for the first time ever, indicating stress in energy markets potentially linked to the closure of the Strait of Hormuz and curtailed supply from Russia.
Stock markets reacted negatively, with major U.S. indices falling between 0.2% and 1.3%. The tech sector was particularly hard-hit, declining 2%, while healthcare and energy sectors saw gains. The Philadelphia semiconductor index dropped 5%. Major Asian markets also fell, with South Korea down 1.5% and Japan down 2.5%.