Global bonds tumble on fears of inflation shock from Iran war

{"text":[[{"start":9.2,"text":"Fears of a lasting inflationary shock from the Iran war sent global government borrowing costs soaring on Friday, with the 30-year US Treasury yield ending the week at its highest closing level since 2007. "}],[{"start":23.15,"text":"Long-dated bonds across Japan, the UK and the US sold off, dragging stock markets lower. The 30-year US Treasury yield — a key benchmark for global long-term interest rates — jumped 0.1 percentage points to 5.12 per cent, its highest closing value since July 2007."}],[{"start":43.55,"text":"In Japan, the 30-year yield climbed 0.14 percentage points to breach 4 per cent for the first time ever following stronger than expected inflation data, while the 30-year gilt yield in the UK rose 0.2 percentage points to its highest level this century at 5.85 per cent, as inflation fears combined with political uncertainty to weigh on bonds. "}],[{"start":66.9,"text":"In a sign of the growing pressure that the bond market sell-off is piling on to governments, the US government earlier this week sold 30-year debt at a 5 per cent yield for the first time since 2007. Over the week, the 30-year Treasury yield rose nearly 0.2 percentage points."}],[{"start":83.2,"text":"The worst US wholesale inflation report since 2022 this week prompted traders to bet that the Federal Reserve’s next move will be to raise interest rates. The odds of a Fed rate rise by the end of the year now stand at roughly 50 per cent, according to CME Group data based on federal funds futures."}],[{"start":103.05000000000001,"text":"“It has been a perfect storm for rates in the last week — higher inflation readings and [a] global rate move spearheaded by [Japanese government bonds] and gilts . . . I think this rate move will begin to tighten financial conditions at the same time as the economy grapples with the ongoing energy shock,” said Priya Misra, a portfolio manager at JPMorgan Asset Management. "}],[{"start":null,"text":"

"}],[{"start":125.75000000000001,"text":"The 10-year Treasury yield rose 0.11 percentage points to 4.59 per cent, its highest level in almost a year."}],[{"start":135.20000000000002,"text":"The one-year, one-year US inflation swap — a derivative product measuring inflation expectations for the 12-month period a year from now — on Friday rose to its highest level since February 2025."}],[{"start":148.55,"text":"Tom Ross, head of high yield at Janus Henderson Investors, said the “strong repricing higher” in global bond yields on Friday was partly reflecting “a growing market conviction that inflation risks may ultimately dominate the policy outlook”. "}],[{"start":163.75,"text":"“Inflation is fast becoming the risk to watch,” he said. "}],[{"start":167.75,"text":"A Bank of America survey on Friday found that fund managers were “growing more nervous about upside inflation risks in the US”, with a quarter of respondents saying the Fed was the most likely among major central banks to deliver more interest rate rises than the market is currently pricing."}],[{"start":184.15,"text":"Stocks sold off as the spectre of higher rates spooked investors. The S&P 500 fell 1.2 per cent and the Nasdaq Composite declined 1.5 per cent, while the Stoxx Europe 600 retreated 1.5 per cent."}],[{"start":198.70000000000002,"text":"“If you get enough of a sell-off in rates you might start to see a pick-up in defaults,” said Deirdre Dunn, head of rates at Citi. “You could see that propagate through to equities. I’m not waiting for the equity market to fall over because of the rates market. But the risk exists, especially at higher valuations.”"}],[{"start":216.00000000000003,"text":"Fears of a global oil shortage have intensified while the Strait of Hormuz remains closed, with little progress in talks between the warring sides. "}],[{"start":224.05000000000004,"text":"After a meeting between US President Donald Trump and Chinese President Xi Jinping this week, there was no indication from Beijing that it would help Washington in its efforts to reopen the vital shipping corridor. "}],[{"start":236.20000000000005,"text":"“There was some expectation that the Beijing summit would bring some kind of resolution to the Iran war and help reopen the strait,” said Emmanuel Cau, head of European equities strategy at Barclays. There was “disappointment” among investors that the summit had not delivered more progress, he added."}],[{"start":253.95000000000005,"text":"“It’s all about oil now,” Cau said. “If oil doesn’t fall, the market cannot go up.”"}],[{"start":261.00000000000006,"text":"Oil prices rose again on Friday. The international benchmark Brent crude settled more than 3 per cent higher at $109.26 a barrel, leaving it up 50 per cent since the eve of the US-Israeli attack on Iran."}],[{"start":283.55000000000007,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778885340_4565.mp3"}