Global Bond Selloff Deepens; US 30-Year Yield Hits 5.11%, Highest Since 2007

Government bond markets around the world suffered a historic selloff on May 15, with the US 30-year Treasury yield climbing to 5.11%, its highest level since 2007. This global rout cuts across all major markets: UK gilts tumbled, European bunds sold off, and Japanese government bonds fell as investors repriced inflationThe rate at which prices rise across an economy. expectations amid geopolitical tensions and rising oil prices. The moves are severe enough that strategists warn the bond market is entering uncharted territory, with one JPMorgan strategist calling yields "unhinged" and another noting the increase poses "an early test for incoming Federal Reserve Chair Kevin Warsh."

The underlying drivers are multifaceted. First, the Iran war has disrupted energy supplies and pushed crude prices higher, creating a near-term inflationThe rate at which prices rise across an economy. shock that spreads across energy-dependent economies. India is already raising fuel prices; Pakistan is securing emergency LNG shipments; and consumer-facing inflation expectations have begun to shift. Second, the market is pricing in a scenario where central banks, particularly the Fed under the incoming Warsh regime, hold rates steady or even hike rather than cut, contradicting the "rate cut" narrative that dominated markets in late 2024 and early 2025. Third, long-durationBond price sensitivity to interest rate changes. assets (30-year bonds, growth equities) suffer when real yields rise; this is forcing a reallocation out of mega-cap tech and into value stocks, energy, and short-duration fixed income.

Equity markets are not immune. The S&P 500 and Nasdaq both fell 1%+ on Friday as bond yields spiked, with chipmakers AMD and NVDA down 3%+ as semiconductor valuations compress under higher rates. Strategists from RBC warn that if the 10-year yield breaches 5%, equity valuations will face significant headwinds, as historical PE multiples rarely sustain at such borrowing costs. Bank of America strategists flagged June as a window for "profit-taking," with equity crowding at extremes and inflationThe rate at which prices rise across an economy. risks elevated.

The debate centers on whether this is a cyclical inflationThe rate at which prices rise across an economy. shock (transitory, subsides with stable energy supply) or the start of a regime shift toward higher structural inflation. Albert Edwards, the longtime SocGen bear, argues for double-digit inflation returning; others contend that the Iran war will eventually stabilize and energy prices will normalize. The Fed's response under Warsh will be critical: too hawkish, and growth falters; too dovish, and inflation entrenches. Market volatility is likely to remain elevated until either geopolitical tensions ease or inflation data confirms that price pressures are contained.