Long-term yields on U.S. government debt surged to their highest levels since 2004 as a sell-off in longer-term Treasury securities resumed, reflecting growing investor concerns about the trajectory of the world’s largest bond market. On Wednesday, yields on the 30-year Treasury rose by as much as seven basis points to 5.53 percent during afternoon trading in New York, before easing slightly to 5.50 percent as oil prices declined. Despite the retreat, yields remained elevated for the day.
The upward pressure on bond yields followed the release of a final University of Michigan consumer sentiment index that exceeded expectations. Market participants interpreted the stronger-than-anticipated data as a sign of robust U.S. economic fundamentals, which has intensified the recent sell-off in government debt. Ten-year Treasury yields also climbed by up to seven basis points, reaching 5.23 percent before pulling back to 5.18 percent. The move represents a significant increase of more than 40 basis points this month and marks the worst performance for the benchmark since October 2024.
Market observers noted investor caution ahead of the weekend amid wide fluctuations in positioning. "It has been a difficult week for bond investors," said Gennadiy Goldberg, head of U.S. rate strategy at TD Securities, noting that many investors were reluctant to hold risk going into the weekend. He added that recent unwinding of positions likely generated substantial losses.
Elsewhere, Brent crude oil prices dipped by about 3 percent to $103.40 per barrel following reports that Iran had extended a seven-day proposal to the United States aimed at reopening the strategic Strait of Hormuz and reviving broader negotiations to end ongoing regional conflicts. However, geopolitical signals remain uncertain. Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho, highlighted comments from Iranian Foreign Minister Abbas Araghchi indicating Tehran was "not in a hurry" to finalize a deal.
In European fixed income markets, bond yields showed little net movement. The yield on the 10-year UK gilt fell by three basis points to 5.36 percent amid some buying interest, while Germany’s 10-year Bund yield climbed by one basis point to 3.62 percent, reaching a level not seen since 2009.
The recent acceleration in bond yields has been driven by expectations of continued strong economic growth, prompting investors to reassess the likelihood of further interest rate hikes from the U.S. Federal Reserve. David Clewell, portfolio manager at T. Rowe Price, noted that breaking key technical thresholds can trigger significant and cascading market moves, contributing to the current volatility in bond markets.