Surging Treasury yields sent the stock market a warning on Friday amid a sell-off in global bonds.
The 30-year Treasury yield (^TYX) rose 10 basis points to reach 5.12%, its highest level since June 2007. The 10-year benchmark yield (^TNX), meanwhile, climbed 11 basis points to 4.57%, its highest level since May 2025. Bond yields and prices move in opposite directions, meaning that when yields rise, prices fall.
Both bonds broke above the key psychological levels of 5% and 4.5%, respectively. As Yahoo Finance’s Jared Blikre has written before, the 5% zone for the so-called long bond represents a danger zone that has tightened financial conditions in the past.
Concerns about rising inflation and hawkish Federal Reserve policy appeared to be behind the move in bonds on Friday.
Fears about higher prices rose to the surface again this week following two hotter-than-expected inflation reports. On Tuesday, the Consumer Price Index showed consumer inflation rose 3.8% year over year in April, largely due to soaring energy costs. On Wednesday, the Bureau of Labor Statistics released the Producer Price Index, which showed wholesale prices rose 6% annually.
A lack of a major breakthrough on the Iran war and Strait of Hormuz during President Trump’s visit to China to meet with his counterpart, Xi Jinping, amplified worries about inflation. US officials were hopeful going into the summit that China would exert pressure on Iran to reopen the Strait of Hormuz. But oil prices rose (BZ=F, CL=F) on Friday as Trump departed Beijing with no concrete agreement on how to end the war.
That has increased the odds that the Fed will not only refrain from lowering interest rates this year but may even consider rate hikes. According to CME’s FedWatch tool, traders priced in near-certainty that the Fed will hold rates steady at its next meeting in June. By the end of the year, traders see a nearly 50% chance that the Fed will raise rates.
The bond rout wasn’t restricted to the US. Global bonds sold off on Friday, with Japan’s 30-year yield hitting 4% and the 10-year UK government bonds hitting 5.14%.
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