Global bond market sell-off intensifies: 10-year JGB yield hits 30-year high, 10-year US Treasury continues to fall, US stock index futures decline, oil rises, gold falls

Strong U.S. economic data combined with weak demand for 5-year U.S. Treasuries has triggered a global bond sell-off and soaring U.S. Treasury yields. The market is repricing the Fed's rate hike path, putting pressure on risk assets.

On Thursday, U.S. stock index futures declined, with Nasdaq futures extending their daily loss to 0.6% and S&P 500 futures dropping 0.4%. European stocks opened lower, and the MSCI Asia-Pacific index fell 0.6%. Brent crude recovered earlier losses, rising 0.2% to $98.33 per barrel. Gold edged down 0.2%, trading near $4,280 per ounce. As interest rates rise, the appeal of non-yielding assets like these declines.

Weak demand at the 5-year U.S. Treasury auction pushed its yield above 5% for the first time since 2007. The Bloomberg Dollar Index hovered near its highest level since July, with traders betting the Fed will raise rates further. The U.S. Treasury market’s sell-off also spread to the Asia-Pacific region, with bond prices falling across Japan, Australia, New Zealand, and emerging markets.

Tony Miano from Wells Fargo Investment Institute stated: "The market is telling us that we have truly entered a renewed tightening cycle. The entire yield curve is being repriced at once, which means discount rates for stocks are rising, mortgage and corporate borrowing costs are increasing, and the threshold for risk assets is higher."

Key market moves are as follows:

• S&P 500 futures fell 0.3%, Nasdaq 100 futures declined 0.3%.
• Euro Stoxx 50 Index opened down 0.53%, Germany's DAX fell 0.57%, UK FTSE 100 dropped 0.36%, and France's CAC 40 lost 0.48%.
• The Nikkei 225 closed up 0.8% at 65,513.99 points. Japan's TOPIX closed down 0.4% at 4,075.30 points.
• 10-year U.S. Treasury yield rose 1 basis point to 5.12%.
• Japanese 10-year government bond yield rose 9 basis points to 3.075%.
• Bloomberg Dollar Spot Index was little changed.
• USD/JPY reversed its decline, rising 0.1% to 158.49.
• Brent crude rose 0.2% to $98.33 per barrel.
• Spot gold fell 0.12% to $4,281.9 per ounce.

Global Bond Sell-Off Spreads, Japanese Bond Yields Soar to Highest Since 1996

The global bond market is experiencing a historic, synchronized sell-off, with Japan's bond market seeing particularly sharp declines after its holiday. The yield on Japan’s 10-year government bond surged by 10 basis points on Thursday to 3.075%, reaching its highest level since August 1996. Yields on the 5-year and 30-year bonds also rose to 2.37% and 4.134%, respectively.

Meanwhile, the U.S. 10-year Treasury yield is approaching a 19-year high, with the 5-year yield briefly breaking above 5%, pushing the entire yield curve of major global bond markets higher.

This round of sell-off has been driven by both internal and external factors. Externally, a rebound in oil prices has intensified inflation concerns, strong U.S. economic data has dampened expectations for Fed rate cuts, and weak demand at the $70 billion 5-year U.S. Treasury auction further pushed yields higher, propagating the U.S. bond sell-off globally. Internally, the Bank of Japan raised interest rates last week but did not clarify its future pace, heightening expectations for further tightening. Combined with spillover shocks from the global repricing of long-term borrowing costs, Japan’s bond market came under concentrated pressure.

USD/JPY quickly climbed above 158 after Japan’s holiday, coming within reach of the 160 mark. Last Friday, the Bank of Japan raised rates by 25 basis points, but Governor Kazuo Ueda’s subsequent remarks failed to satisfy market expectations for further tightening. As a result, the yen fell rather than rose, seeing a significant two-week cumulative decline, reigniting intervention risk.

Geopolitical Developments Move Markets: Oil Prices Rise, Gold Falls

Brent crude rose 0.2% to $98.33 per barrel. On the geopolitical front, according to Xinhua News Agency, Iranian President Pezeshkian said during the general debate at the United Nations General Assembly on the 23rd that Iran will "never bow down or surrender" and called on all nations to work together for peace.

At the same time, U.S. diesel prices rose to a record $6.50 per gallon, making energy costs a political burden for the White House ahead of the midterm elections. Trump expressed support for banning diesel exports, but several senior officials questioned the effectiveness of such measures, with both administrations maintaining a cautious stance.

Spot gold fell 0.12% to $4,281.9 per ounce.