Bond Markets Sound Alarm: US Yields Soar on Tightening Fears
The US bond market is sounding an alarm as investors increasingly price in more tightening from the Federal Reserve and European Central Bank. The US 10-year Treasury yield rose to 5.16%, approaching its highest level since mid-2000, with a 3.29% rise on the week and roughly 24% higher since the start of the year.
Traders now see about a 66% probability of a 25-basis-point Fed hike next month, driven by hawkish comments from Federal Reserve officials and stubborn inflation signals. The pressure isn't just about policy; strong economic data, deteriorating fiscal conditions, and a growing government debt pile are also weighing on the bond market.
Europe is feeling the pain too, with Germany's 10-year Bund yield climbing to 3.60%, its highest since June 2009, marking a seventh straight weekly advance. Money markets are now pricing roughly 100 basis points of ECB rate hikes by late 2027.