Global Bond Rout Deepens as US 30-Year Yield Hits 2007 High on Inflation Fears

The global bond selloff accelerated Friday as investors repriced inflationThe rate at which prices rise across an economy. risk in the wake of the Iran-driven oil shock and a batch of hot economic data. US Treasury yields climbed sharply, with the 30-year yield reaching 5.11%, the highest level since May 2025, and the 2-year yield also surging as markets priced in a rising probability of Fed tightening instead of the rate-cut expectations that had dominated early May. The selloff was synchronized across G-7 markets: sterling fell to its worst week versus the dollar since 2024, and European bond yields also climbed amid concerns that the war-driven energy shock would force central banks to delay or cancel easing cycles.

The catalyst was twofold: oil prices climbed on reports that Iran's main export hub had paused operations due to an alleged spill, reducing global crude supply just as geopolitical tensions remained elevated. Simultaneously, inflationThe rate at which prices rise across an economy. data released earlier in the week came in hotter than expected, eroding confidence in the disinflation narrative that had supported risk assets in recent weeks. Bond traders began unwinding the implicit assumption that the Fed would cut rates in 2026, with derivatives markets now pricing a material probability of rate hikes as early as December. JPMorgan's Kay Herr and other strategists noted that 'bond vigilantes' had returned, signaling a regime shift away from the accommodative environment that had propelled equities and crypto higher.

Equities sold off sharply as a result, with the Nasdaq down 1.3% and the Russell 2000 up only 0.7% despite nominal gains, indicating a flight from growth into defensive value. Semiconductor names like AMD and NVDA fell 3 percent as rates climbed. Bitcoin dipped below $79,000, and Ethereum fell below $2,200 as the higher real yields made durationBond price sensitivity to interest rate changes.-sensitive assets less attractive. Credit markets also came under pressure: investment-grade spreads widened and high-yield credit held up better, suggesting investors were rotating into higher-yielding, shorter-duration bonds.

The question for next week is whether the yield shock reflects a genuine shift in inflationThe rate at which prices rise across an economy. expectations or a temporary panic that will reverse as geopolitical tensions ease. SocGen warned that Treasury yields were becoming 'unhinged,' and incoming Fed Chair Kevin Warsh will face his first test managing a regime change away from decades of monetary ease. If inflation fears persist, the bond selloff could force a repricing of all risk assets, unwinding months of AI-driven gains.