The yields on key U.S. Treasury bonds touched fresh 24-year highs Wednesday, as the latest global bond sell-off picked up steam.
The 10-year Treasury yield rose as high as 5.36% and the 30-year Treasury yield hit 5.73% — the highest levels for each since 2002.
Benchmark government bonds in France and Italy also rose sharply. The yield on the U.K. 30-year government bond hit its highest level since 1998.
When bonds fall, their yields rise.
U.S. bond yields pulled back later in the day, following a Treasury Department auction of $39 billion worth of 10-year bonds, for which there was strong demand.
But at 5.3%, the yield on the auctioned bonds was the highest of any U.S. government sale of 10-year debt since November 2000.
“Bottom line, for whatever reason, likely the 24 yr highs in rates, brought out the buyers and resulted in a great auction,” wrote Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. “In response, the 10 yr yield has backed off to 5.27% from 5.31% just prior to the results.”
The bond rout had sent stocks tumbling early in the day, but as the decades-high yields eased, so did losses among the major stock indexes.
After notching record highs on Tuesday, both the S&P 500 and Nasdaq ended the day down about 0.2%. The Dow fell 341 points or 0.6%. The Russell 2000, which tracks small and medium sized companies, declined 1.3%.
European stock markets had seen steeper selling. The Stoxx 600 index ended lower by 1%, while benchmark indexes in France and Germany closed down by around 1.3%. Italy’s FTSE MIB index slid 2.5%.
As stocks fell, oil prices flipped between gains and losses, but largely hovered around their highly-elevated levels. Brent crude oil declined 0.5% but was still at more than $100 per barrel in afternoon trading.
A looming debt crisis
The recent rise in bond yields only compounds the pain for governments around the world that have seen their borrowing costs soar since the start of the year.
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Overnight, International Monetary Fund chief Kristalina Georgieva warned that governments urgently need to take steps to get their unprecedented debt under control.
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She also predicted that government bond yields around the world would remain under pressure because of the ever-expanding artificial intelligence boom.
“Policymakers had a relatively easy ride over the last 17 years, as for all that time interest rates were stuck below GDP growth rates,” Georgieva said in a speech. “Higher interest rates now put an end to that.”
Her comments followed multiple reports that Elon Musk’s SpaceX is planning to raise $40 billion in cash to buy AI chips from Nvidia. NBC News has not independently confirmed the reports and SpaceX did not immediately reply to a request for comment.
But if the company follows through, that borrowed $40 billion would join hundreds of billions more in bond sales by AI-linked companies in recent years. The companies are using the money to build data centers and buy equipment with which to fill them.
Some economists believe that the vast sums of money being borrowed by private AI companies could pile additional pressure on government bond yields.
“France may be on the verge of a full-blown debt crisis,” wrote Ed Yardeni, president of Yardeni Research on Sunday.
He noted that the yield on French 10-year government bonds has risen the most of any major economy this year. Coming in second is the United States, while Italy, a country traditionally viewed as far more risky by the bond markets, comes in third.
Apollo economic strategist Huw van Steenis wrote in a Wednesday note, “Hyperscalers have raised $48 billion in bonds in European currencies this year, which is already more than triple the entire amount of 2025.”
