Bonds Suffer Worst Month in Years Amid Rising Inflation

Global bonds experienced their worst month in years due to deteriorating government finances and rising inflation. The seven-month-old US-Israeli war on Iran continues to impact energy costs, resulting in a sharp rise in sovereign borrowing costs this quarter.

The benchmark 10-year US Treasury yields held just below their highest level since June 2007 at 5.2363% in the European hours, down 1.9 basis points (bps). They were set for a rise of more than 47 bps this month, the largest move in about two years.

Despite the sharp rise in sovereign borrowing costs, stock markets have remained broadly resilient. The S&P 500 was broadly unchanged this month and up 2.3% so far in the quarter. US equity markets are reacting to the rise in bond yields but only outside of the tech space.