The yields on U.S. Treasury bonds have spiked and hit their highest level in 20 years or longer as hopes fade for an end to the Iran war.
Early on Aug. 18, the yield on the U.S. 30-year Treasury was up two basis points to 5.3275%, its highest level since 2002.
The yield on the 20-year Treasury note was at its highest level since 2006, while the benchmark 10-year Treasury yield was at 4.74%, its highest since 2007.
The rise in Treasury yields appears to have sparked a global selloff in government bonds, sending borrowing costs to multi-decade highs.
Germany’s benchmark 10-year bund yield is at a 15-year high, while its French
counterpart is at its highest yield since 2008.
In Japan, the 10-year bond yield rose to 2.954%, topping the 40-year high seen earlier this year. Bond yields have also spiked overnight in the United Kingdom, Switzerland, and Canada.
Bond yields and prices move in opposite directions to each other, with one basis point equal to 0.01%, or 1/100th of 1%.
Market analysts are attributing the spike in government bond yields to several factors.
Unsuccessful efforts to bring an end to the Iran war have put inflation fears and potential interest rate hikes front of mind for investors.
Several market commentators also said that there are growing concerns around high levels of U.S. government debt.
As such, investors are demanding greater compensation for the risks of holding long-dated U.S. Treasurys.
The national debt in America hit a record $40.03 trillion U.S. earlier this month. Interest payments on the debt cost $1.2 trillion U.S. annually, consuming about 19% of federal spending.
The rise in government bond yields, coupled with a rise in crude oil prices, have stock markets around the world firmly in the red on Aug. 18.
Brent crude oil, the international standard, is back above $90 U.S. a barrel amid signs of protracted Middle East tensions and hostilities.
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