Global bond selloff pushes U.S. 10-year yield to 5.34%, highest since 2002

# What happened Global government bonds came under heavy selling again on Thursday, pushing yields sharply higher. The U.S. 10-year Treasury yield reached 5.34%, its highest level since 2002. That follows the biggest quarterly rise for the U.S. 10-year this century in the three months to September.

# Why yields are rising Several concrete forces are driving the move:

• Energy prices have risen, adding to inflationary pressure.
• Stronger-than-expected growth indicators in Europe and Asia convinced markets the economy can handle higher rates for longer.
• A burst of investment in AI and data centres has lifted expectations for durable demand and higher short-term rates.
• Institutional demand for longer-dated debt has been weak: State Street data cited minimal buying interest in the past 18 months.

HSBC economist Fred Neumann warned that milder inflation prints alone won't reverse the narrative because central banks will need to move decisively to rebuild credibility.

# Where the impact is largest The selloff is broad but uneven across countries:

• United States: The 10-year Treasury yield at 5.34% is the most-watched benchmark and sets borrowing-cost reference points for mortgages, corporates and other government debt. Traders have moved to price in at least three more Federal Reserve rate hikes before mid-2027.

• France: The French 10-year yield jumped toward 4.96% and briefly climbed another 10 basis points during the session. France is presenting its 2027 budget bill, and higher yields make unpopular fiscal tightening harder to pursue. State Street's Tim Graf said French OATs are being hit because "it's budget time and it's messy." The spread between French and German 10-year yields is the widest since the euro zone debt crisis of the 2010s, and debt-insurance costs for France are at levels last seen in 2013.

• Britain: The 30-year gilt rose above 6%, its highest since 1998. UK data also showed the slowest house-price growth in nearly two years, pointing to real-economy effects of higher rates.

• Japan: After years of battling deflation, Japan's sovereign yields recorded a fifth consecutive quarter of double-digit gains, reflecting a shift toward higher inflation expectations.

# Market and fiscal consequences Rising yields translate into higher financing costs across the economy:

• Governments: More budgetary resources will go to interest payments, tightening fiscal space for other spending. The Institute of International Finance estimated advanced economies paid over $3.3 trillion in interest on internationally traded government bonds in the past year.

• Corporates and households: Higher borrowing costs raise corporate finance costs and push mortgage rates higher, which can slow housing markets and business investment.

• Equities: The rout began to spill into stocks. European shares, especially bank stocks, fell sharply with the STOXX 600 touching its lowest since June. Credit-market stress showed up in junk-bond default-swap indexes rising to multi-month highs.

# What central banks and markets expect next

Julius Baer analyst Afonso Borges noted that stronger growth has led markets to conclude the economy can sustain higher rates for longer, an outlook that supports further upward pressure on yields.

# Bottom line This is a global repricing of long-term interest rates driven by higher energy costs, stronger growth signals and shifting rate expectations. The consequences are broad: higher sovereign financing bills, stress on sensitive equity sectors and tougher borrowing conditions for companies and households. Unless institutional demand for long-term bonds recovers or central-bank guidance changes materially, yields may stay elevated, keeping pressure on budgets and markets.