Bond Markets Spike as Inflation Fears Reach Multi-Decade Highs

Bond markets dominated the past week, driven by rising oil prices and inflation fears that sent borrowing costs to multi-decade highs in the UK, US, and Japan. The catalyst was a reported tanker incident in the Strait of Hormuz, which pushed Brent crude above $95 per barrel for the first time in five weeks.

This caused gilt yields in the UK to skyrocket, with 30-year yields reaching their highest level since 1998 at 5.89% on Tuesday and 10-year yields touching a 19-year high of 5.29% on Wednesday. US 10-year Treasury yields rose to nearly three years' highs at 4.81%, while Japan's 10-year yield hit 3% for the first time since 1996.

Equities initially suffered from the surge in bond yields, but recovered after a dovish Fed statement and strong earnings reports from tech companies like Snowflake. The US jobs report on Friday, however, revived rate-hike bets with a stronger-than-expected reading of 162,000 new payrolls.