(Bloomberg) -- A deepening global bond selloff sent the US benchmark yield to the highest since early 2025, as thin August trading met investors wary of inflation and a deluge of corporate debt supply.
US Treasuries slid further on Tuesday, pushing yields higher by one to two basis points across maturities. The 10-year yield crept up around two basis points to 4.75%, the highest in 19 months.
The moves were echoed across sovereign debt markets from Europe to Japan, fueled by an uncertain outlook for inflation and changing bond-buyer demographics. Earlier on the day, Germany sold 30-year debt via banks paying the highest yield in 15 years.
"The selloff in Treasuries has become a macro event unto itself," Ian Lyngen, head of US rates strategy at BMO Capital Markets, wrote in a note to clients.
A busy corporate issuance slate also contributed to Tuesday's moves. August issuance hit an all-time high for the month on Monday, topping $145 billion, as 12 issuers sold $9.1 billion of notes.
At the same time, prospects for peace in the Middle East suffered further setbacks, with US President Donald Trump saying he's not interested in extending the expiring agreement with Iran and tensions flaring anew in the Strait of Hormuz. Brent crude climbed above $91 a barrel on Tuesday after trading at its highest since late July.
Even so, traders have backed off of their wagers on higher US borrowing costs this year after a series of economic data releases that support a wait-and-see approach at the Federal Reserve. In the interest-rate swaps market, traders were pricing in a roughly 35% chance that officials led by Chairman Kevin Warsh lift interest rates when they next meet in September. October is seen as a coin toss, with a hike not fully priced in until January 2027.
"We don't think the Fed hikes next month, but that doesn't mean the market is going to be pricing in a zero probability on the eve of the decision," Lyngen wrote. "Warsh's elimination of forward guidance has complicated the policy outlook to be sure."
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