Global Bond Selloff: 10-Year Treasury Yield at 19-Year High, Japan's 10-Year at 30-Year High; Stocks Fall, Oil Up, Gold Down

U.S. stock futures fell, with Nasdaq futures widening their intraday decline to 0.6% and S&P 500 futures down 0.4%. Japan's 10-year government bond yield surged 10 basis points to 3.075% on Thursday, the highest since August 1996. Brent crude rose 0.2%, while gold slipped 0.2% to trade near $4,280 an ounce.

Strong U.S. economic data combined with weak demand at a five-year Treasury auction triggered a global bond selloff and a surge in Treasury yields, prompting markets to reprice the Federal Reserve's rate hike path and weighing on risk assets.

On Thursday, U.S. stock futures moved lower, with Nasdaq futures widening their intraday decline to 0.6% and S&P 500 futures down 0.4%. European stocks opened lower, and the MSCI Asia Pacific Index fell 0.6%. Brent crude recovered from early losses, rising 0.2% to $98.33 a barrel. Gold slipped 0.2% to trade near $4,280 an ounce, as rising interest rates reduced the appeal of non-yielding assets.

The 10-year U.S. Treasury yield rose 2 basis points to 5.14%, the highest since 2007, after weak demand at a five-year auction pushed its yield above 5% for the first time since 2007. The Bloomberg Dollar Index hovered near its highest level since July, with traders betting on further Fed rate hikes. The selloff in Treasuries also spread to the Asia-Pacific region, with bond prices broadly lower in Japan, Australia, New Zealand, and emerging markets.

Tony Miano of Wells Fargo Investment Institute said: "The market is telling us that we have entered a true re-tightening cycle. The entire yield curve is repricing simultaneously, which means higher discount rates for equities, higher mortgage and corporate borrowing costs, and a higher bar for risk assets."

Key market moves:

S&P 500 futures fell 0.3%, and Nasdaq 100 futures fell 0.3%.

The Euro Stoxx 50 opened down 0.53%, Germany's DAX fell 0.57%, the UK's FTSE 100 fell 0.36%, and France's CAC 40 fell 0.48%.

The Nikkei 225 closed up 0.8% at 65,513.99. The Topix closed down 0.4% at 4,075.30.

The 10-year U.S. Treasury yield rose 2 basis points to 5.14%, the highest since 2007.

Japan's 10-year government bond yield rose 10 basis points to 3.075%.

The Bloomberg Dollar Index was little changed.

The dollar reversed losses against the yen, rising 0.1% to 158.49.

Brent crude rose 0.2% to $98.33 a barrel.

Spot gold fell 0.12% to $4,281.9 an ounce.

Global Bond Selloff Spreads, Japan's Yields Surge to Highest Since 1996

Global bond markets suffered a historic synchronized selloff, with Japan's market catching up sharply after a holiday. Japan's 10-year government bond yield surged 10 basis points to 3.075% on Thursday, the highest since August 1996, while 5-year and 30-year yields rose to 2.37% and 4.134%, respectively.

Meanwhile, the 10-year U.S. Treasury yield rose 2 basis points to 5.14%, the highest since 2007, and the 5-year yield briefly topped 5%, driving yields higher across major global bond markets.

The selloff was driven by a combination of internal and external factors. Externally, rebounding oil prices heightened inflation concerns, strong U.S. economic data cooled expectations for Fed rate cuts, and weak demand at a $70 billion five-year Treasury auction directly pushed yields higher, transmitting the selloff globally. Internally, the Bank of Japan raised rates last week but did not clarify the pace of future moves, fueling expectations of further tightening, which, combined with the spillover from repricing of global long-term borrowing costs, put concentrated pressure on Japan's bond market.

The dollar quickly rose above 158 against the yen after Japan's holiday, just a step away from the 160 level. The Bank of Japan raised rates by 25 basis points last Friday, but Governor Kazuo Ueda's subsequent remarks failed to meet market expectations for further tightening, causing the yen to weaken instead, with a significant cumulative decline over two weeks and renewed intervention risk.

Geopolitics Moves Markets: Oil Up, Gold Down

Brent crude rose 0.2% to $98.33 a barrel. On the geopolitical front, according to Xinhua, Iranian President Masoud Pezeshkian said in his speech at the UN General Assembly general debate on the 23rd that Iran "will never bow, nor will it surrender," and called on all countries to work together for peace.

Meanwhile, U.S. diesel prices hit a record high of $6.50 per gallon, making energy costs a political liability for the White House ahead of the midterm elections. Former President Trump voiced support for banning diesel exports, but several senior officials questioned its effectiveness, and both administrations have been cautious on the matter.

Spot gold fell 0.12% to $4,281.9 an ounce.