Bond Market Sell-Off Reaches Decade High Amid Warsh Remarks and Oil Price Surge
The global bond market is experiencing its most brutal round of sell-offs in nearly two decades. The Bloomberg Global Aggregate Government Bond Index yield has risen for four consecutive trading sessions, reaching a high of 3.72% since mid-2008. This systemic repricing is affecting the US, Japan, Australia, and even the G10.
On Tuesday, September 1, the 10-year US Treasury note yield rose to 4.78%, the highest level since January 2025, while the 10-year Japanese government bond yield hit 3%, a level not seen since 1996. The Australian and UK government bond yields also reached their highest levels in years.
Analysts point out that Federal Reserve Chair Kevin Warsh's hawkish remarks at Jackson Hole, combined with the escalation of US-Iran tensions, pushed Brent crude oil prices above $90 per barrel, directly strengthening inflation expectations and further pushing down bond prices. The market is pricing for higher interest rates maintained for a longer period.
Warsh's speech marked the fifth consecutive year that the Fed failed to keep inflation within its target level. After the speech, the market's implied probability of a Fed rate hike in September jumped from 34% to 65%. Multiple current and former US and Iranian officials believe the Middle East conflict will last for several months, keeping energy prices high.
Additionally, the U.S. national debt has exceeded $40 trillion, and the supply pressure in the Treasury market continues to intensify. Large technology companies are issuing long-term corporate bonds, competing with government bonds for funds.