A sharp and sustained sell-off in global bond markets has triggered widespread concern among investors, with yields on U.S. 10-year Treasuries surging past 5.2%—a level not seen since 2007. The selloff reflects mounting fears over persistent inflation and aggressive central bank policy, prompting a reevaluation of fixed-income strategies.
- U.S. 10-year Treasury yields surpassed 5.2%—the highest since 2007
- Bloomberg Global Aggregate Bond Index dropped 3.5% in one month
- Two-year Treasury yields hit 5.45% amid expectations of delayed rate cuts
- German bund yields rose to 2.95%, UK 10-year gilts reached 4.1%
- Corporate high-yield spreads widened by 85 basis points
- Mortgage refinancing activity declined 12% due to higher rates
The recent bond market upheaval intensified this week as government debt across major economies faced unprecedented downward pressure. U.S. 10-year Treasury yields climbed above 5.2%, marking their highest level in nearly two decades and signaling a dramatic shift in investor sentiment. This spike followed a 3.5% decline in the Bloomberg Global Aggregate Bond Index over the past month alone, one of the steepest monthly drops in its history. Market analysts attribute the selloff to heightened expectations of prolonged high interest rates. Data released by the Federal Reserve indicated that core inflation remained stubbornly elevated at 3.8% year-over-year in December, reinforcing speculation that rate cuts may be delayed until mid-2026. In response, the yield on two-year Treasuries jumped to 5.45%, reflecting tight short-term rates and reduced demand for long-duration bonds. In Europe, German bund yields rose to 2.95%, while UK gilts saw a similar trend, with 10-year yields reaching 4.1%. These moves have prompted asset managers to reassess portfolio allocations, with institutional flows into equity and cash assets increasing by $42 billion in the past three weeks. Hedge funds have also begun unwinding leveraged bond positions, contributing to further volatility. The ripple effects are evident in corporate credit markets, where high-yield bond spreads widened by an average of 85 basis points over the same period. Companies with lower credit ratings face higher borrowing costs, potentially constraining investment and hiring plans. Meanwhile, mortgage lenders report a 12% drop in refinancing applications, indicating rising household financial stress from higher interest burdens.