Energy Price Surge Triggers Bond Market Panic

A new wave of strikes in the Iran war has led to a surge in energy prices, further fueling the selloff across world bond markets. Investors are bracing for a series of central bank interest rate rises this month, with rising government borrowing costs concentrated on the economically sensitive 10-year benchmark rates.

The U.S. 10-year Treasury yields hit their highest since 2023 on Wednesday at 4.8%, fast approaching a 5% level seen as a major challenge to equities for mixed asset portfolio managers. With interest rate rises now odds-on at the Federal Reserve, European Central Bank, and Bank of Japan this month, there's a nervous couple of weeks ahead.

New Zealand's Reserve Bank became the first central bank to pull the trigger with its second consecutive rate rise on Wednesday. The fresh jump in energy prices is adding to the budgetary and political pressures for many governments as the winter season approaches.