Global Bond Yields Surge as Central Banks Gear Up for Rate Hikes

The bond market is sending a clear signal that central banks will continue to raise interest rates in September. Global bonds have pushed yields higher, with the US 10-year yield reaching its highest level since January 2025 at 4.77%, while Australian yields are at levels not seen since 2011.

The Reserve Bank of Australia is attracting serious money for another rate hike, and even the Reserve Bank of New Zealand is expected to raise rates tomorrow.

The Federal Reserve's decision on a September rate hike has gained momentum after Kevin Warsh's comments, with markets now pricing a 65% probability of a hike. The front end of US interest rates remains above 4.20%, with around 16 basis points of tightening priced for September and 37 basis points through year-end.

The dollar has surrendered half its post-Jackson Hole gains, despite higher front-end US rates. This is because the back end of long Treasury yields is still viewed partly through the lens of fiscal and Treasury intervention after Scott Bessent's buyback moves.