Yields on U.S. Treasurys advanced Tuesday as investors continued to dump bonds on fears inflation is reigniting. The 30-year Treasury yield hit the highest level in nearly 19 years.
The longer-dated 30-year Treasury bond yield was last trading more than 3 basis points higher at 5.183%. It briefly hit 5.197% during the session, marking its highest level since July 2007.
The 10-year U.S. Treasury note yield — the key benchmark for mortgages, auto loans and credit card debt — was up 4 basis points to 4.667%. Earlier in the session, it climbed to 4.687%, or its highest level since January 2025. The 2-year Treasury note yield, which reacts to expectations of short-term Federal Reserve interest rate moves, last rose by 3 basis points to 4.12%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Rates rose following a string of reports last week suggesting inflationary pressures were reaccelerating as rising oil prices tied to the conflict with Iran pushed costs higher. The development spooked fixed income investors and caused traders to bet the next move by the Fed could be a rate hike, instead of a reduction.
“It’s a real problem,” said Jim Lacamp, senior vice president at Morgan Stanley Wealth Management, on CNBC’s “Squawk on the Street” on Tuesday. “When we started this year, everybody expected rates to come down — that was part of the bull case. Now, it looks like we’re going to see a rate hike.”
Elevated borrowing costs on products such as credit cards and mortgages may weigh on consumer spending, while higher yields could also slow longer-term economic growth and put pressure on the lofty valuations in equities.
Ian Lyngen, BMO’s head of U.S. rates, said if and when 30-year rates manage to reach 5.25% in the next few weeks, there will be a “more durable pullback” in equity valuations.
30-Year Treasury yield
The S&P 500 closed down 0.67%, ending at 7,353.61 to mark its third losing session in a row. Meanwhile, the Nasdaq Composite finished 0.84% lower at 25,870.71. The Dow Jones Industrial Average also shed 322.24 points, or 0.65%, to close at 49,363.88.
A Bank of America survey published Tuesday showed 62% of global fund manager respondents expect 30-year Treasury yields to hit 6%, equaling the highest level since late 1999 and an increase of about 85 basis points from current prices. Only 20% of respondents are targeting a 30-year yield of 4%.
Yields on longer-term government debt in the U.K. and Germany were also elevated on Tuesday. The yield on German 30-year bunds stood at 3.684%, with Britain’s 30-year gilt yield rising less than 1 basis point to 5.773%. Japan’s 30-year yield hit a record this week.
— With reporting from CNBC’s Alex Harring and Hugh Leask.
