U.S. Treasury Sell-Off Hits New Milestone! 30-Year Yield Soars to 5.44%, Highest in Over 20 Years

The yield on ultra-long-term U.S. government bonds reached a more than 20-year high on Thursday (24th), marking a new milestone in the ongoing selloff of long-term bonds driven by inflation and fiscal worries.

The yield on the U.S. 30-year Treasury briefly rose four basis points to 5.44%, the highest since 2004. Meanwhile, the 10-year Treasury yield continued climbing from Wednesday’s 19-year high.

Yields across the U.S. Treasury curve rose sharply this week, with various maturities approaching their highest levels since 2007. Contributing factors include stronger-than-expected U.S. economic activity, hawkish comments from Federal Reserve (Fed) officials, rising oil prices due to geopolitical tensions between the U.S. and Iran, growing fears of accelerating inflation, and increased government borrowing.

Ed Al-Hussainy, portfolio manager at Columbia Threadneedle Investments, said: "People are running out of adjectives to describe the 30-year Treasury yield. What investors are saying is, 'If we're going to lock up our money for 30 years, we need to be compensated more.'"

S&P Global's Purchasing Managers' Index (PMI), released Wednesday, showed that the U.S. September services PMI climbed to 58.7, the highest in nearly five years, while the manufacturing PMI rose to 56.7, the highest in over four years.

These data boosted market expectations for further Fed rate hikes. According to CME Group's FedWatch tool, traders currently assign a 70% probability of a rate hike at the Federal Open Market Committee (FOMC)’s October meeting.

Federal Reserve Governor Michael Barr said Wednesday that the central bank may need to make “further policy adjustments” to bring inflation down to target.

Deutsche Bank analysts said in a report on Thursday analyzing the Treasury selloff: "The main drivers are the strong PMI data combined with rebounding oil prices, both of which reinforce market belief that the Fed might accelerate its pace of tightening."

Rising Treasury yields continue to undermine the U.S. Treasury Department’s efforts to lower long-term borrowing costs. In mid-August, Treasury Secretary Scott Bessent ramped up buybacks of U.S. Treasuries in an attempt to ease market pressure, but so far, the impact on markets has been limited.