US Benchmark Bond Yield Surges Past 5%, Sparking Market Volatility Worldwide
Global Impact of Rising US Treasury Yields
SINGAPORE, Sept 15 (Reuters) - Sovereign yields climbed further on Tuesday, led by the 10-year U.S. Treasury yield which hit a nearly two-decade top, while signs of discomfort deepened for borrowers and global investors.
Central Bank Responses and Policy Adjustments
The Telegraph newspaper of Britain reported that the Bank of England could stop selling the 20- and 30-year gilts it holds, presumably as a way to reduce pressure on long-dated debt. South Korea's incoming finance minister told parliament he plans to stabilise volatility, if needed, and is closely watching rising yields.
Inflation and Sovereign Debt Concerns
Yields rise when bond prices fall and they have climbed on a mix of worries about inflation and ballooning sovereign debt.
Consequences for Government Borrowing Costs
The selloff is significant because it raises borrowing costs for governments, leaving them with larger interest bills and less to spend on social, defence and other programmes.
Broader Market Reactions
Benchmark Yield’s Influence on Global Markets
The 10-year Treasury yield topping 5% is also eye-catching because it is a benchmark price not just for lending rates in the U.S. but for nearly every other asset in financial markets.
Stock Market Volatility and Policy Responses
Its rise as high as 5.0328% rattled stock markets in Asia and traders were waiting to hear from U.S. Treasury Secretary Scott Bessent - who has sought but struggled to dampen selling with expanded debt buybacks - when he appears before Congress.
"If yields keep rising, then there's bound to be further spillover effects," said Khoon Goh, ANZ's head of Asia research in Singapore.
Expectations for US Interest Rate Hikes
Part of this week's bond selloff, he said, was also attributable to a shift in expectations for short-term U.S. interest rates which traders expect to be hiked by 25 basis points (bps) on Wednesday and by a further 40 bps by the middle of next year.
International Yield Movements
Asia-Pacific Bond Yield Highs
Japan's 10-year bond yield hit a three-decade high above 3%. Australian 10-year yields jumped by more than 7 bps to close at 5.41%, capping a climb of 40 bps in just three weeks.
European Benchmark Yields
In Germany, the 10-year benchmark yield sat near its highest since 2009 at 3.55%, while French 10-year yields were hovering near an 18-year high.
(Reporting by Tom Westbrook; Editing by Thomas Derpinghaus)
