US Treasury yields remained elevated on Friday after a fresh selloff in global bonds pushed the 30-year yield to its highest level since 2004, raising borrowing costs and adding to concerns about the impact of higher rates on economies and asset valuations.The 30-year Treasury yield had climbed to 5.5016% on Thursday, its highest level since 2004, before easing from the peak. The benchmark 10-year yield rose to 5.1751% on Friday after touching 5.2251% a day earlier, its highest level since 2007.The latest moves extended a bond rout that intensified after stronger-than-expected US business activity data on Wednesday revived inflation concerns and prompted investors to raise bets on further Federal Reserve rate hikes. Bond prices move inversely to yields.The selloff also spread across global debt markets. Japan’s 10-year government bond yield rose to 3.115%, its highest since 1996, while Australian 10-year yields also climbed. Higher US Treasury yields have pushed up borrowing costs globally and threaten to put pressure on equity valuations.Oil prices have added to inflation concerns. Brent crude was around $105 a barrel on Friday after rising 3% in the previous session, although it later eased about 1.2%. The return of oil above $100 has strengthened expectations that the Fed may have to raise rates further to contain inflation.Markets are now pricing a greater chance of another Fed rate increase as soon as next month. Fed funds futures indicated about a 73% probability of a hike, up from roughly 53% earlier in the week, according to Reuters.The Fed raised interest rates last week for the first time in more than three years, and the prospect of additional tightening has begun to influence other central banks as well. Norway’s central bank raised rates on Thursday, while Sweden’s central bank signalled that a hike could follow by year-end.The Treasury market is also absorbing increased government borrowing needs and uncertainty over inflation and fiscal policy. At Thursday’s seven-year Treasury auction, the US sold $44 billion of notes at a high yield of 5.085%, the highest for a seven-year auction since 1993.The pressure on longer-dated bonds has important implications for households and investors because Treasury yields influence borrowing costs across the economy. US mortgage rates have moved towards 7%, adding to pressure on the housing market.Despite the bond selloff, Asian equities remained relatively resilient on Friday. Japan’s Nikkei rose about 1.3%, while Hong Kong’s Hang Seng fell 1.4% and Australia’s resources-heavy shares declined 0.4%. US stock futures were modestly higher.The dollar was also on track for a gain of about 1% for the week as investors reassessed the outlook for US interest rates.Markets are now assessing the aftermath of US President Donald Trump’s talks with Chinese President Xi Jinping, with investors weighing what the meeting means for trade, artificial intelligence, Taiwan and the Iran war.
