Global Bond Yield Surge Triggers Currency Volatility

The US Treasury yield has crossed the 5% mark for the first time since October 2023, pushing up bond yields globally. The surge in crude oil prices to $109 a barrel from $90 at the beginning of the month contributed to this increase. As a result, the Federal Reserve raised interest rates by 25 basis points (bps) in its recent meeting and has kept the door open for another rate hike this year.

Government bond yields have reached multi-year highs across major economies, including Europe, Japan, and the UK. Germany's 10Yr Bund yield is at a 15-year high of 3.5%, while the UK's 10Yr Gilt yield has hit an 18-year high of 5.3%. Japan's 10Yr Government Bond yield has reached a 30-year high of 3%.

According to Federal Reserve Chairman Kevin Warsh, three factors are driving bond yields higher: economic strength, competition for capital leading to increased capital expenditure, and geopolitical issues. The ongoing US-Iran war is one common factor that may be contributing to the surge in bond yields across major economies.