October 2: The yield on the benchmark US 10-year Treasury note touched 5.34% on Thursday, its highest level since 2002, as a sell-off in government bonds spread across the world’s major economies. Borrowing costs in Britain, France and Japan also stand at their highest in decades, Reuters reported. A bond’s yield rises when its price falls, so the move means investors are demanding more to lend to governments.
Key highlights
- US 10-year yield: Touched 5.34% on October 1, then eased to about 5.26% later in the morning, Quartz reported.
- US 30-year yield: About 5.6%, also the highest in more than two decades.
- Britain: The 30-year gilt yield crossed 6% for the first time since 1998.
- Rate outlook: Markets are pricing in at least three more Federal Reserve rate increases before mid-2027, according to Quartz.
- Home loans in the US: The average 30-year mortgage rate has moved above 7% for the first time since early 2025.
What is driving the sell-off
Quartz listed three forces: higher inflation because of rising energy prices, very large borrowing to pay for artificial intelligence infrastructure, and stronger growth forecasts. Analysts quoted by Reuters added large government deficits to that list.
“Higher bond yields may well be the new normal,” said Fred Neumann of HSBC, who called it “a structural shift” linked partly to the AI sector’s demand for long-term capital. Timothy Graf of State Street put it more simply: “Central bank rates are going up.”
Fiona Cincotta of City Index said governments in major economies remain unlikely to take hard decisions to cut spending. Rory McPherson of Wren Sterling said the selling has tracked oil prices and strong US data, and that there have not been enough buyers.
A global move, not only an American one
The pressure is not limited to the United States. According to Quartz, Britain’s 30-year gilt yield has crossed 6% for the first time since 1998, France’s 10-year yield is near 5%, its highest since 2002, and Japan’s 10-year yield is at levels last seen in the mid-1990s. Graf of State Street pointed to pressure on French and Italian government debt during the budget season.
Why it matters
Government bond yields are the base on which most other borrowing is priced. When they rise, home loans, company loans and government interest bills all become more expensive. In the US, the 30-year mortgage rate is already back above 7%.
Danny Zaid of TwentyFour Asset Management, quoted by Quartz, said that although the economy looks strong for now, the climb in yields “could increase the risk of a slowdown”.
What it means for India
Indian stock and bond markets were closed on Friday for Gandhi Jayanti, so the first reaction will come on Monday. When US yields rise, the extra return that investors get from emerging-market bonds shrinks. That tends to pull foreign money out of markets such as India and put pressure on the rupee.
Indian markets are already under strain. The Sensex fell 1,124 points on September 28 to a six-month low as crude oil jumped, as we reported, and Asian markets were watching bonds and oil on Thursday. The Reserve Bank of India’s monetary policy committee is due to announce its decision on October 7.
Sources
- Reuters via Investing.com: Instant View: Bond markets take a drubbing again, 10-year Treasury yields highest since 2002
- Quartz: U.S. 10-year Treasury yield hits highest level since 2002
- Quartz via Yahoo Finance: U.S. 10-year Treasury yield hits highest since 2002
The Business Desk covers markets, the economy, companies and personal finance. Stories are checked against at least two credible sources before publication.
