Bond Market Sell-Off Deepens Amid Rising Energy Prices and Inflation

Global bond markets are facing a severe sell-off as inflation and rising oil prices push up borrowing costs to multi-decade highs. The Middle East conflict has driven energy prices up, fueling investor fears about inflation and ballooning government debt.

The yield on 10-year U.S. Treasury notes rose to a near three-year high of 4.81%, with a further climb toward 5% likely to unsettle already jittery stock markets. Japan's 10-year yield was perched above 3%, a 30-year high, while Australia's 10-year government bond yields rose to 5.198%, their highest level in over 15 years.

Analysts warn that the selloff can overshoot with 5% on the U.S. 10-year looking increasingly plausible before yields become attractive enough to bring buyers back. The spree of bond sales from big tech companies, aggressively raising money to fund the AI boom, has added pressure on the sovereign bond market.

Investor focus is also on what the Federal Reserve may do to contend with inflation that has remained above the central bank's 2% target. Energy cost pressures continue to dog policymakers as Brent crude futures rose 1% to $95.61 per barrel on Wednesday.