The global bond market selloff is intensifying, with U.S. 10 year and 30 year Treasury yields reaching their highest levels since mid 2002. The pressure is not limited to the U.S., with Japanese government bonds also trading near levels last seen in the 1990s.
Several factors are being cited behind the move, including higher than expected inflation in Europe, oil market pressures and resilient U.S. economic data. However, the scale of the bond market move points to deeper structural shifts in Treasury markets, with marginal buyers becoming increasingly sensitive to price.
In foreign exchange markets, the euro is also under pressure, trading near a 17 month low as wide interest rate differentials with the U.S. dollar, weaker commodity terms of trade and political uncertainty weigh on the currency. Europe is also facing challenges around LNG supplies from the Middle East, adding further risks for the euro and potentially keeping pressure on yields.
The upcoming U.S. nonfarm payrolls report could provide another important signal for markets. A weaker than expected jobs number could reduce some of the momentum behind the recent rise in bond yields.