JPMorgan Chase points out that the 30-year US Treasury yield rose to approximately 5.31%, reaching its highest level since the summer of 2007; the 10-year yield was around 4.72%, at the 94th percentile over the past three months, while the 30-year yield was at the 100th percentile. The yield curve continued its bearish steepening, with longer-term yields facing significantly more pressure than shorter-term yields.
JPMorgan Chase believes this rise in long-term yields largely reflects an increase in term premiums. Mid-term inflation expectations have only changed slightly during the same period, making it difficult to explain such a significant rise in long-term yields. Global bond markets are also under pressure, especially with the 30-year Japanese government bond yield rising back above 4%. In the past, during periods of negative interest rates and yield curve consolidation (YCC), Japanese long-term bond yields were lower, making US Treasuries, after hedging against currency fluctuations, relatively more attractive; this advantage is now diminishing.
This means that long-term US Treasuries are increasingly influenced by global capital costs and the relative valuations of overseas bonds. Even if the market reduces its pricing of further tightening by the Federal Reserve, long-term yields may not necessarily fall in tandem.
