Bloomberg Gauge Shows Global Long-Term Bond Yields at Highest Since 2008

A Bloomberg gauge of long-term sovereign debt yields has climbed to its highest level since the global financial crisis.

“The surge in global inflation expectations driven by rising oil prices has seen Bloomberg’s gauge of the average yield-to-maturity on sovereign debt due a decade or longer climb to the highest since July 2008,” the publication reported on May 20.

Bloomberg’s gauge of average sovereign bond yields, a broad measure of government borrowing costs, is closely watched by investors.

The yield on the 10-year Treasury eased overnight to 4.64 percent from 4.66 percent late Tuesday. The 10-year yield has jumped to this level from below 4 percent before the war with Iran.

The auction was part of the Treasury’s wider May refunding plan. On May 6, the Treasury stated that it would sell $58 billion in three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds while raising $41.7 billion in new cash from private investors.

Treasury bond yields represent the return that investors receive for lending to the U.S. government over different periods. They move in the opposite direction of prices, meaning that higher yields usually reflect falling bond prices or investors demanding a better return to buy the debt.

Rising oil prices linked to the Iran war have pushed inflation fears.

However, the markets have also seen some relief from higher energy prices.

Early Wednesday, U.S. benchmark crude oil fell 4 percent to $106.87 per barrel, though this is well above its roughly $70 level from before the war.

“We’re seeing a broader repricing of duration driven by fiscal realities, persistent inflation risks and some political uncertainty, as well as a more demanding investor base,” Patrick Coffey, head of a research group at Barclays Plc in London, told Bloomberg on Wednesday.

“It’s hard to point to a near-term catalyst outside of the reopening of the Strait of Hormuz that could fully reverse the current selloff,” he said.

Mohit Kumar, chief European economist at Jefferies, ​said on May 20 that his firm had advised clients to avoid longer-dated bonds.

“Even if we stay in this ‘No War No Peace’ scenario for an extended ⁠period, it would have a negative impact on oil prices and inflation. We should also see government support for fuel subsidies and an increase in unemployment benefits as ​the oil shock reduces economic activity,” he said.

“Higher rates should also start feeding into risky assets,” he added, which typically refers to stocks and other asset classes such as ​corporate credit.

The S&P 500 and the ​Nasdaq opened higher on ‌Wednesday, lifted by a rebound ahead ​of Nvidia’s quarterly earnings, the defining stock of the AI boom.

Expectations are high for the chipmaking giant Nvidia, which will announce first quarter earnings after the market close on Wednesday.

Bloomberg TV reported on May 18, that Nvidia’s quarterly revenue is projected to increase by almost 80 percent year over year to nearly $79 billion.

The Dow Jones Industrial Average edged down by 0.03 percent at the open on Wednesday, while the S&P 500 increased by 0.3 percent and the Nasdaq Composite gained 0.43 percent.

European shares dipped slightly on Wednesday.

As of 08:51 GMT, Germany’s DAX was up by 0.2 percent. Germany’s 10-year yield, the euro zone benchmark, fell by 3 basis points from Tuesday’s 15-year high to 3.16 percent.

The CAC 40 in Paris rose by 0.3 percent. Britain’s FTSE 100 was flat.

Japan’s Nikkei 225 fell by 1.2 percent. The yield on the 10-year Japanese government bond remained near its highest level since 1997.

“At this point of time, it remains my base case that we are seeing a corrective pullback after an absolutely phenomenal rally,” Tony Sycamore, analyst at IG, said on May 20. “The U.S. yields obviously are creating some rumbles in the market and now attracting a lot of attention.”

“Nvidia could come out and absolutely exceed expectations … but I don’t think so. I think the ability for Nvidia to just absolutely shoot the lights out and shock everybody like it has done, I don’t think that’s in its book of tricks anymore,” he said.

The Associated Press and Reuters contributed to this report.