Bond yields hit multi-decade highs as oil tops $100
Global borrowing costs spiked to new records on Thursday. U.S. crude futures exceeded $100 per barrel. Equity markets in the U.S. and Europe declined.
Global bond yields reached multi-decade highs on Thursday. U.S. Treasury yields rose sharply as investors priced in higher inflation. The 30-year U.S. bond yield hit its highest level since 2007. The 2-year yield increased by 15 basis points. Long-term UK gilt yields are now at their highest point in nearly 30 years. French long-term yields are the highest in over 20 years.
Oil prices jumped 6% on Thursday. U.S. crude futures joined Brent in crossing the $100 per barrel mark. This surge followed increased attacks on shipping in the Middle East. The market is worried about further disruptions to tight supplies. U.S. diesel prices hit a record high of $5.98 per gallon. European natural gas prices are the highest since 2022.
Equity markets fall on energy costs
Stocks in the U.S. and Europe slid on Thursday. The S&P 500 fell 0.6%. The Nasdaq dropped 1%. European and UK indices declined by 0.6%. Nine of the 11 sectors in the S&P 500 closed lower. Materials and utilities led the losses. Apple shares rose 3.5% against the broader trend. The dollar strengthened broadly against other major currencies.
Central banks respond to price pressures
The European Central Bank raised interest rates on Thursday. This is the second hike this year. The bank warned that energy-driven inflation may persist. Markets now expect more tightening as soon as October. In the U.S., the Federal Reserve faces pressure from a hot inflation outlook. The upcoming CPI report will determine next week's policy move. A hawkish stance may hinder efforts to lower the dollar's value.
Fiscal risks drive yield spikes
U.S. President Donald Trump proposed a $5,000 payment to every adult. This offer is conditional on his party winning the November midterms. Such fiscal expansion adds to inflation worries. Tech companies are also issuing heavy corporate debt. This AI-driven borrowing binge is changing valuation rules. The combination of fiscal and corporate debt is pushing yields higher. GN auto markets/bonds: bond trading reports solid demand for U.S. Treasuries despite the yield rise.
