Global government bond yields extended their climb — with the US 30-year reaching the highest point since 2011 and other benchmarks returning to 2008 levels — as resilient economic data challenges the view that central bank rates are peaking.
Both five- and 10-year Treasury yields rose Thursday to within a few basis points of their 2022 highs. The 30-year yield advanced as much as seven basis points to 4.42%, putting it well above the less than 4% level it traded at as recently as July 31. The US 10-year yield climbed to as high as 4.33%, up nearly eight basis points. The equivalent UK yield jumped to a 15-year high, while its German counterpart approached the highest since 2011.
Treasury yields remained near session highs after the weekly tally of jobless claims suggested the labor market remains resilient. It’s a reversal from the start of the year, when optimism that rate hikes were close to ending sent global bonds soaring, with the Bloomberg Global Aggregate benchmark jumping more than 3% in January for its best opening month to a year on record. The gauge slid Wednesday to be down 0.1% for the year.The higher yields in the US continue to draw in buyers. Investors pumped $127 billion this year into funds that invest in Treasuries, on pace for a record year, Bank of America Corp.
“Much of the bear case for bonds is cyclical and local to the US,” Major wrote. “It therefore misses the global backdrop, along with longer-run structural drivers. The fact that some emerging-market central banks are already easing tells us that inflation is falling fast or that they have cyclical and structural headwinds.”
“There is a reasonable likelihood that as supply comes to the market investors will have to be encouraged with some additional premium in higher yields,” said Pimco’s Schneider.
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