Global bond yields hit their highest levels since 2002 on Thursday as a deepening debt rout met rising oil prices and economic data, sending stock futures mixed at the start of October.
The benchmark 10-year Treasury yield climbed to 5.3% on Thursday, echoing a peak last seen in April 2002, while the 30-year bond yield reached 5.65%, matching levels from July of that same year. U.S. Treasury yields surged to levels not recorded in more than two decades, compounding pressure on markets already grappling with renewed energy costs and sticky inflation concerns. Across the Atlantic, government borrowing costs climbed in tandem, with German 10-year bunds hitting their highest yields since 2008 and British 30-year gilt yields touching 6% overnight.
Stock Futures Mixed as Crude Oil Bounces Back Above $100
Stock futures pointed in conflicting directions as trading opened for October. S&P 500 futures edged up 0.2% and Nasdaq futures gained 0.6%, while Dow Jones Industrial Average futures declined 0.2%. The uneven sentiment followed a choppy September that left the S&P 500 down 0.5% for the month despite a modest 2% gain across the third quarter as a whole.
Brent crude, the international standard, rose 2.1% to $100.10 a barrel, staying above the $100 threshold first crossed in early September during an escalation of fighting between the U.S. and Iran. Weighing on equities was an ongoing climb in energy markets. Energy markets remained jittery over the timeline for fully restoring crude flows, particularly after U.S. President Donald Trump publicly rejected a recent proposal from Tehran to reopen the Strait of Hormuz within a week under specific conditions.
Strong GDP Prints Erase Inflation Relief
Wednesday brought a sharp whiplash to trading floors. Markets initially rallied when core PCE inflation cooled to 3.0% year-over-year—lower than the 3.3% expected by analysts—which momentarily slashed October rate-hike expectations from roughly 72% down to 35%. That relief proved short-lived. Stronger GDP and ADP prints quickly erased the market optimism.
New York Federal Reserve President John Williams indicated on Thursday that it was reasonable to think that the U.S. central bank might need to raise interest rates.
Heavy Government Debt Drives Bond Selloff
Consumers and businesses faced mounting cost pressures from fuel. Critics warn that while a diesel export ban may offer some relief, that would be short-lived and the havoc on energy markets risks counteracting any benefits.
Beyond immediate energy expenses, financial analysts pointed to structural fiscal strain as a primary driver behind the global bond selloff. Governments worldwide continue to carry exceptionally heavy debt loads, leading markets to demand higher yields on long-term sovereign debt.