Global bond sell-off intensifies, US 10-year Treasury yields soar to new highs since 2025

The Zhitong Finance App learned that on Tuesday, the sell-off in the global bond market continued to deepen, and the yield on US benchmark treasury bonds rose to the highest level since the beginning of 2025. Market trading was already light in August, and investors' concerns about the outlook for inflation and the surge in corporate bond supply contributed to this round of rising yields.

US Treasury bonds fell further on Tuesday, with yields generally rising by 1 to 2 basis points for each term. Among them, the yield on 10-year treasury bonds climbed about 2 basis points to 4.75%, hitting a 19-month high.

This wave of sell-offs has swept through global sovereign bond markets such as Europe and Japan. The driving factors behind it include rising uncertainty about the inflation outlook and changes in the bond buyer structure. On the same day, Germany's 30-year treasury bonds issued through bank groups, and coupon interest rates hit the highest level in 15 years.

Ian Lyngen, head of US interest rate strategy at BMO Capital Markets, wrote in a report to clients: “The sell-off in US bonds itself has become a macro event.”

Intensive issuance of corporate bonds was also an important driver of Tuesday's market. On Monday, August, the scale of corporate bond issuance reached a record high for that month, surpassing 145 billion US dollars. A total of 12 issuers sold a total of 9.1 billion US dollars of bonds on the same day.

Meanwhile, prospects for peace in the Middle East have been further thwarted. US President Trump said that he has no intention of extending the agreement with Iraq, which is about to expire, and the tension in the Strait of Hormuz is once again heating up. Affected by this, Brent crude climbed above $91 per barrel on Tuesday, having previously hit the highest level since late July.

However, with the recent release of a series of economic data, traders have lowered their bets on a further rise in US borrowing costs during the year — these data support the Federal Reserve's wait-and-see attitude. The interest rate swap market shows that traders expect the probability that the US Federal Reserve, led by Chairman Kevin Walsh, will raise interest rates at the September meeting is about 35%. The probability of an interest rate hike in October is viewed as a “five to five opening”, and the time for the market to fully set interest rates has been postponed to January 2027.

Lyngen further stated in the report: “We don't think the Federal Reserve will raise interest rates next month, but that doesn't mean the market will set the probability of a rate hike to zero on the eve of a decision. “Walsh's removal of forward-looking guidance certainly further complicates the policy outlook.”