Bond Rout Intensifies as Fed Rate Hike Bets Spook Markets

A global bond sell-off has intensified, with Treasury yields across much of the curve reaching their highest levels in nearly two decades. The US 10-year yield steadied to 5.11% in Asian trading after a 15-basis-point surge on September 23, its biggest increase since President Donald Trump's April 2020 tariff announcement.

The sharp rise in yields has been driven by robust US economic data and weak demand at a debt auction. The average yield on global government debt rose to within a whisker of 4% as traders ramped up bets on further Federal Reserve tightening following last week's first rate increase since 2023.

'This is the market telling us we've entered a genuine re-tightening cycle,' said Tony Miano from Wells Fargo Investment Institute. 'The entire curve is repricing at once, which means higher discount rates for equities, higher mortgage and corporate borrowing costs, and a higher bar for risk assets.'

The Fed's rate path has come back under scrutiny, with officials raising borrowing costs last week to a range of 3.75% to 4%. US Fed chairman Kevin Warsh said the move removed a 'dose of accommodation', while Fed governor Michael Barr noted further rate hikes are likely needed to return inflation to the central bank's 2% target.