The bull market in stocks now has something new to worry about now: sky-high yields around the world. The long-term U.S. 30-year Treasury bond yield topped 5.1% on Friday, touching its highest level going back to May 22, 2025. In the U.K., 30-year Gilt yields reached levels not seen in nearly three decades. Thirty-year yields on Japanese and German bonds also hit their highest levels since the late 1990s. Those gains come as oil prices remain elevated amid the ongoing U.S.-Iran war. Higher crude prices are seeping through to consumer and wholesale goods in the U.S., based on new data released this week by the Bureau of Labor Statistics. On top of that, a new Federal Reserve chief with a dovish bias is set to take over the central bank. “Global sovereign bonds no longer ignore these numbers,” wrote Ben Emons, portfolio manager of Highline Wealth Partners. “Bond yields confront the Thucydides Trap; markets react to a rising-power-versus-ruling-power dynamic. Rather than between nations, the conflict is between fiscal dominance (the rising power) and monetary policy credibility (the incumbent power).” US30Y 1Y bar US 30-year bond yield “Fiscal dominance involves large deficits, heavy Treasury issuance, a rising interest expense burden, and the market’s sense that fiscal policy overwhelms monetary policy,” he added. “At the same time, monetary policy credibility could be at stake due to the Fed’s diminished potential ability to anchor inflation expectations, control the yield curve, and ensure market functioning. Thus, investors are pulling exposure from long-term sovereign bonds. This selling pressure has also seeped into stocks. Stocks fell sharply in early trading, pressured by the rise in yields as well as a lack of major announcements from the U.S.-China summit that concluded Friday. Until Friday’s session, stocks had enjoyed a strong week, with the Dow Jones Industrial Average reclaiming the 50,000 level and the S & P 500 closing above 7,500 for the first time. “In the absence of an Iran deal, inflation fears are rising and spilling into food prices. This puts the new Fed chair Warsh in a difficult position. While it is hard to see a hike for this year, both 10yr and 30yr US Treasuries are at major levels. A break of key levels may lead to steepening, which could coincide with a moderate SPX pull-back,” wrote Dirk Willer, head of global macro strategy at Citi.
