Global Bond Selloff Pushes US 10-Year Yield to Its Highest Level Since 2002

The US 10-year Treasury yield rose to 5.34% on Thursday, its highest since 2002, after its biggest quarterly rise this century in the three months to September. Dip buyers stepped in and the benchmark later traded near 5.32%, but more moves are possible. HSBC’s Fred Neumann said markets are in a discovery process to find the new long-term anchor, and that bond investors will demand a premium until monetary tightening is delivered. He added that expansionary fiscal policy is equally to blame for persistent inflation.

Why Bond Yields Are Rising

Soaring energy costs are fanning inflation, while the AI and data-centre boom raises competition for capital and expectations for growth and short-term rates. Julius Baer’s Afonso Borges said stronger growth has led markets to conclude the economy can sustain higher rates for longer. Traders now expect at least three more Fed hikes before mid-2027, after a hike last month, even though cooler inflation data on Wednesday pushed back near-term expectations.

French Bond Yields Near 5%

France’s 10-year yield also hit its highest since 2002, close to 5%, after its worst quarter since 1987. The gap with German yields is the widest since the euro zone debt crisis, and the cost of insuring French debt is the highest since 2013. The government presents its 2027 budget on Thursday, which may struggle to pass belt-tightening measures. Markets are asking whether the ECB might support French bonds, though that looks unlikely for now.

UK, Japan and Global Borrowing Costs

Britain’s 30-year yield rose above 6%, the highest since 1998, and house price growth slowed to its weakest in nearly two years. Japan’s yields posted a fifth straight quarter of double-digit gains. The IIF estimates advanced economies paid over $3.3 trillion in interest on internationally traded government bonds in the past year, more than global spending on AI ($2.6 trillion), defence ($3.1 trillion) or clean energy ($2.3 trillion). The ECB has raised rates twice this year, and markets price three more 25-basis-point hikes by mid-2027.

Stocks and Credit Markets React

European stocks hit their lowest since June but were down only 0.5%, while US stocks were set to open higher. An index of junk bond credit default swaps hit its highest since early April. Daiwa’s Chris Scicluna said higher rates are not yet a showstopper, citing earnings and AI investment momentum.