The yield on major U.S. Treasury bonds hit a new 24-year high on Wednesday, as the latest global bond sell-off gathered pace.
Benchmark government bonds in France and Italy also rose sharply and were on course for their biggest one-day rise since March, when the outbreak of war in Iran shook global markets. The yield on 30-year UK government bonds has risen to its highest level since 1998.
When bonds fall, their yields rise.
Following these movements closely, the 10-year Treasury yield reached 5.35% and the 30-year Treasury yield reached 5.73%, the highest levels for each since 2002.
The bond rout sent stocks tumbling as investors bet that rising bond yields would raise corporate borrowing costs and reduce profits.
Europe’s broader Stoxx 600 index fell 1%. Benchmarks in France and Germany fell more than 1%, and Italian shares in the country’s FTSE MIB index fell almost 2.5%.
U.S. stocks also fell Wednesday morning, just a day after the Nasdaq and S&P 500 closed at record highs. At the start of the session, the S&P 500 was down 0.6% and the Nasdaq Composite was down 0.8%.
As stocks fell, oil prices rose, increasing pressure on bond yields. Brent crude oil rose 1% in early trading, to over $102 a barrel.
The Treasury Department will sell a $39 billion tranche of flagship 10-year notes on Wednesday at 2 p.m. ET, and investors will be closely watching how the markets react.
The recent rise in bond yields only adds to the suffering of governments who have seen their borrowing costs soar since the start of the year.
Overnight, the head of the International Monetary Fund, Kristalina Georgieva, warned that governments must take urgent action to bring their unprecedented debts under control.
She also predicted that government bond yields around the world would remain under pressure due to the ever-growing boom in artificial intelligence.
“Policymakers have had a relatively easy ride over the last 17 years, because all that time, interest rates have been stuck below GDP growth rates,” Georgieva said in an interview with Bloomberg television. “Higher interest rates now put an end to this situation. »
His comments follow multiple reports that Elon Musk’s SpaceX plans to raise $40 billion in cash to buy AI chips from Nvidia. NBC News has not independently confirmed this information, and SpaceX did not immediately respond to a request for comment.
But if the company follows through, the $40 billion borrowed would join hundreds of billions more in bond sales by AI-related companies in recent years. Companies use this money to build data centers and buy equipment to fill them.
Some economists say the huge amounts of money borrowed by private AI companies could put further pressure on government bond yields.
“France may be on the verge of a real debt crisis,” Ed Yardeni, president of Yardeni Research, wrote on Sunday.
He pointed out that the yield on French 10-year government bonds has seen the biggest rise of any major economy this year. The United States comes in second, while Italy, a country traditionally considered much riskier by bond markets, comes in third.
Apollo economic strategist Huw van Steenis wrote in a note on Wednesday: “Hyperscalers have raised $48 billion in European currency bonds this year, which is already more than triple the 2025 total.”
Gn bussni
