- The 10-year Treasury yield touched 4.814%, its highest level since November 2023, before easing to 4.77%; the 30-year yield stood at 5.26%.
- Brent crude reached a one-month high after U.S.-Iran strikes, while European natural gas prices reached their highest level since early 2023, reinforcing inflation concerns.
- Rising yields spread across Japan, Germany, and the UK as investors focused on elevated government debt, fiscal deficits, and higher defense and welfare spending.
- Markets increased the probability of a September Fed hike after hawkish comments from Kevin Warsh and Michael Barr, with the U.S. jobs report next in focus.
- Corporate borrowing for AI infrastructure added supply pressure to bond markets as companies issued debt to fund data-center investment.
Quotes
“Jobs data may have less impact than inflation numbers given Warsh's assertion at Jackson Hole that price stability was the higher priority with sticky inflation well above target, while describing labor as stable”
“The fear is that the bond vigilantes are on the loose and driving yields higher in protest over large government deficits”
“Investors are looking at government debt levels and ever-rising fiscal deficits as countries seem incapable of taking the difficult decisions needed to reduce spending, or raise taxes, to get their respective houses in order and calm markets”