Long-term U.S. bond yields rose to the highest since 2007

The yield on 30-year U.S. government bonds on Tuesday, Ma. 19, exceeded 5.18%, reaching the level that was last seen on the threshold of the global financial crisis in 2007, then continued to grow and rose to 5.19%. Investors continued to sell bonds amid fears of a new round of inflation, CNBC explains.

The yield on 10-year U.S. Treasuries - a key benchmark for rates on mortgages, auto loans and credit card debt - jumped to 4.67%, the highest since January 2025.

The sharp rise in oil prices due to the U.S. conflict with Iran began to be reflected in a series of inflation reports published last week. This alarmed investors in debt markets around the world and made traders bet that the next step of the Federal Reserve may be not a reduction, but an increase in rates, writes CNBC.

"Even if a Middle East agreement is reached, oil prices will no longer return to pre-war levels. We think they will be 25-30% higher [pre-war] in six months," Jefferies chief economist and strategist Mohit Kumar told CNBC. He also pointed to the impact of huge budget deficits, as every government will have to subsidize household fuel costs. He said that while the market is now laying down rate hikes, "it's not justified" because inflation is likely to rise by about the same amount as economic growth slows.

According to a Bank of America survey released Tuesday, 62% of global fund managers expect the yield on 30-year U.S. Treasuries to reach 6%. That matches the highest level since late 1999. Only 20% of respondents expect yields at 4%, CNBC reports.

A team of strategists at Goldman Sachs Group sees some signs of attractive bond valuations, but urges caution, Bloomberg writes. At the same time, strategists at Barclays and Citigroup warn clients that yields may exceed 5.5% - the last time such figures were in 2004. The head of BlackRock's research division, on the contrary, recommends investors to reduce investments in government bonds of developed countries, including U.S. treasuries, in favor of stocks, the agency reports.

The Fed will be forced to respond to inflation. The scenario of "higher rates for a longer period of time" forced investors to revise expectations on monetary policy writes Bloomberg. If before the war traders expected up to three Fed rate cuts this year, now there is a growing probability that the regulator's next step will be an increase, the agency emphasizes.

If the bond sell-off continues, the rise in yields could lead to an increase in the cost of mortgage and corporate loans in the U.S., which threatens to slow down the world's largest economy. Against this background, expectations of possible intervention from the authorities are growing, which are already shifting the placement of government debt towards shorter-term securities, Bloomberg writes

The jump in bond yields also threatens to hit U.S. consumers and undermine the persistent bull market in U.S. stocks, CNBC writes. The higher bond yields are, the more attractive they are for investors to shift capital from stocks to bonds.

This article was AI-translated and verified by a human editor