United States Treasury Securities (U.S. Treasuries) Hit 24-Year High; Global Bond Market Suffers 'Domino Shock'

[Financial News New York = Correspondent Lee Byung-cheol] The sell-off in U.S. Treasuries that began in the United States is roiling global bond markets as it spreads to Europe and Japan. The surge in international oil prices triggered by the Iran war has revived inflation concerns, while countries' fiscal deficits and increased funding demand stemming from expanded artificial intelligence (AI) investment have added to the pressure.
The U.S. 10-year Treasury yield soared to 5.34% intraday on the 1st (local time). It was the highest level in roughly 24 years, since 2002. In the third and fourth quarters last year, it recorded the worst quarterly performance of the 21st century in terms of the size of the yield increase.
The 10-year yield later fell to the 5.2% range as bargain hunters entered the market, but investors remain wary of further selling. Analysts say the $32 trillion U.S. Treasury market, which serves as a benchmark for global borrowing costs and asset prices, has entered a vicious cycle in which selling triggers more selling. Bond prices and yields move in opposite directions.

The U.S.-led sell-off quickly spread across the Atlantic to Europe.
The yield on France's 10-year government bond surged 0.1 percentage point intraday to 4.96%, its highest level since mid-2002. Political uncertainty and concerns over fiscal soundness are simultaneously weighing on the market as the French government unveils its 2027 budget proposal, which includes €43 billion in spending cuts and tax increases.
The yield spread between 10-year French government bonds and 10-year German government bonds (Bunds) widened to near its highest level since the eurozone debt crisis in the 2010s. The cost of credit default swaps (CDS) insuring against a French sovereign default also climbed to its highest level since 2013.
The yield on the UK's 30-year government bond (gilt) broke above 6%, reaching its highest level since 1998. Italy's 10-year government bond yield also rose to 4.69%, pushing its spread over German government bonds to 1 percentage point for the first time since March.
Japan is no exception. The yield on Japan's 10-year government bond rose to 3.1%, approaching its highest level in decades. Japanese government bond yields have recorded double-digit increases for five consecutive quarters.

One of the key factors driving global bond yields higher is energy prices.
Brent Crude Oil, the benchmark for international oil prices, rose more than 4% on the day to $102.38 per barrel. Concerns that an energy price surge caused by the Iran war will reignite inflation are fueling bond selling. The correlation between oil prices and U.S. Treasury yields has recently risen to its highest level since 1990.
Large fiscal deficits in various countries and the boom in AI and data-center construction are also weighing on bond markets. Large-scale corporate borrowing to fund AI infrastructure investment is intensifying competition between governments and the private sector for funding, driving up long-term yields.
According to the Institute of International Finance (IIF), advanced economies paid more than $3.3 trillion in interest over the past year on government bonds traded in international markets. That amount exceeds both the estimated $2.6 trillion in global AI spending and $3.1 trillion in defense spending.
Danny Zaid, a portfolio manager at TwentyFour Asset Management, told Reuters, "As interest rates remain high, financial conditions could tighten and the risk of an economic slowdown could increase."




[email protected] Lee Byung-cheol, Correspondent Reporter