Bond Selloff Continues Amid Oil Price Surge, Inflation Concerns

A global selloff in bonds continued into Asian markets as oil prices surged to over 75% this year, driving inflation concerns and pushing long-term Treasury yields to multi-decade highs. The yield on a global bond index hit 4% for the first time since 2007.

The Australian and New Zealand 10-year government bonds slipped in early Asian trading, while the US 30-year Treasury yield rose to its highest level since 2004, with an additional eight basis points added to the 10-year yield. The pressure on bond markets was exacerbated by an expanded Treasury buyback operation that fell short of investor expectations.

Oil prices remained a major concern, with Brent crude closing at $106.60 a barrel after gaining for two days. Some relief came as US and Iranian negotiators explored a phased deal that would see Tehran reopen the Strait of Hormuz and Washington lift its blockade of Iranian ports.

Fed officials continued to emphasize inflation risks, with Philadelphia Fed President Anna Paulson stating additional hikes may be needed to return inflation to target. New York Fed President John Williams also highlighted the need for further action on price pressures.