Long-term Treasury yields soared to multiyear highs and the dollar strengthened as investors anticipated a prolonged period of high US interest rates. The yield on the benchmark 10-year US Treasuries reached its highest level in 16 years at 4.54%, while the 30-year note rose to 4.66%, the highest since 2011. In Europe, the yield on the 10-year German Bund reached 2.81%, its highest level since 2011. The sell-off in global government debt was triggered by central banks indicating that the cycle of interest rate hikes is nearing its end but high rates will be necessary to curb inflation.
As a result, the dollar index, measuring the greenback against six major currencies, rose 0.5% and reached its highest level since November of the previous year. Meanwhile, Wall Street’s S&P 500 closed 0.4% higher, with the energy and materials sectors leading the gains, while the tech-heavy Nasdaq Composite advanced nearly 0.5%. However, European markets experienced a downturn, with the Stoxx Europe 600 falling 0.6% and Germany’s Dax losing 1%.
The market turbulence extended to Asian markets due to news that Chinese property giant Evergrande was unable to issue new debt amid an investigation into its principal subsidiary, Hengda Real Estate Group. Evergrande’s shares plummeted more than 20%, exacerbating concerns about China’s struggling property market. Furthermore, there are growing worries about a second wave of global inflation due to recent oil supply cuts. Investors are eagerly awaiting eurozone inflation data this week to gain insights into policymakers’ plans for future interest rates.