US 30-Year Yield Hits 5.11%, Highest Since 2007; Bond Rout Halts AI Rally

Global bond markets are in freefall as Treasury yields surge to their highest levels since 2007, with the 30-year hitting 5.11% as inflationThe rate at which prices rise across an economy. fears grip investors worldwide. The selloff is being driven by a combination of geopolitical risk, energy price shocks tied to Iran tensions and potential Strait of Hormuz closure, and fresh inflation data that has caught markets off-guard. Oil prices remain elevated despite a softer demand outlook, creating a stagflationary setup that central banks cannot easily dismiss.

The bond rout is directly threatening the valuation foundation of the AI rally that has driven mega-cap tech stocks to record concentrations. Rising discount rates compress the present value of future earnings, especially for high-growth names with earnings power concentrated in the out years. Markets are repricing the probability of Fed rate hikes; fed funds futures now price a hike as soon as December, a dramatic reversal from earlier consensus for cuts. Kevin Warsh, the incoming Fed Chair, is inheriting an FOMCThe Federal Open Market Committee - the Fed's rate-setting body. in no mood to ease, adding pressure on equities to justify current multiples on earnings fundamentals alone.

The cross-asset implications are stark: energy importers face margin pressure from elevated oil prices; treasuries face durationBond price sensitivity to interest rate changes. losses; equities face multiple compression. The consensus 60-40 portfolio is experiencing synchronised losses across both stocks and bonds, a rare regime that leaves few safe havens. G-7 finance chiefs are convening to discuss the selloff, signalling official concern. Skeptics note that inflationThe rate at which prices rise across an economy. may prove transitory if geopolitical tensions ease or if AI productivity offsets energy costs in the medium term; however, near-term positioning suggests pain before relief.