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Government bond selloff deepens as the 10-year Treasury pushes past 5 percent

US and European sovereign yields extended their slide in price as faltering Iran diplomacy revived higher-for-longer oil expectations, dragging junk bonds toward their worst month since 2022.

Assembled by Claude from 15 sources at 12 outlets · Tuesday, September 29, 2026, Morning edition, 11:42 AM EDT · no human byline

Disclosure. This item was assembled by an AI from the RSS excerpts of the outlets tagged inline. No human wrote or checked it before publication. Feed selection and categories are editorial choices by Teresa Lo. Nothing here is investment advice.

What happened

The selloff in US and European government bonds deepened after President Trump rejected Iran's truce proposal marketwatch.com. The US 10-year Treasury yield returned to levels not seen since 2007 semafor.com, with one account putting the move above 5.05 percent and calling it a 19-year high m.economictimes.com. A separate report described bond yields as reaching a 22-year high tastylive.com, a discrepancy in framing that the sources do not resolve.

Credit followed. High-yield bonds are on course for their worst month since 2022, when inflation was soaring, and popular bond exchange-traded funds have been pummelled morningstar.com. In the US, both junk bonds and their investment-grade peers were heavily affected marketwatch.com. Bonds slumped to a monthly loss while equities wobbled finance.yahoo.com.

The move also showed up in currencies, with the dollar rallying as global capital chased risk-free yield and the dollar index tested multi-year highs investing.com.

Why it matters to investors

Federal Reserve governor Christopher Waller said the premium for US government bonds as a safe asset has disappeared, with buyers shifting toward hedge funds biz.chosun.com. That is a statement about market structure, not just price: if Treasuries are held increasingly by leveraged buyers, the path of any future selloff changes.

Higher risk-free rates also reprice the capital spending wave. Man Group argued that yields around 5.5 percent risk cracking both artificial intelligence capital expenditure and the US consumer bloomberg.com. Rockefeller's Ruchir Sharma warned that an AI bubble would burst after the 10-year yield hit 5 percent bloomberg.com.

Sovereign yields set the floor under every other discount rate, so a 10-year Treasury above 5 percent reprices equity valuations, mortgage costs and the funding of leveraged credit at the same time es.tradingview.comm.economictimes.com. The junk bond move is the visible transmission: when the risk-free rate rises and spreads widen together, the weakest borrowers refinance at materially worse terms or not at all morningstar.commarketwatch.com.

What to watch

Policy expectations are the proximate driver. New York Fed President John Williams called another increase this year a reasonable way to think about it, and one estimate put October hike odds at roughly 64 percent pennmutualam.com. Governor Michael Barr said further rate increases are likely to be needed es.tradingview.com.

Positioning is not one-sided. Bob Michele, global head of fixed income at JPMorgan Asset Management, said the entire yield curve is oversold marketscreener.com. Treasuries sank as US-Iran talks failed to ease inflation fears bloomberg.com, so any credible de-escalation is the clearest route to a reversal.

Sources

  1. marketwatch.com: Selloff in U.S., European Government Bonds Deepens -- 4th Update - MarketWatch (2026-09-28)
  2. morningstar.com: Junk bonds are heading for worst month since 2022 after punishing global selloff (2026-09-29)
  3. marketwatch.com: Junk bonds are heading for worst month since 2022 after punishing global selloff (2026-09-29)
  4. semafor.com: Bond selloff deepens on oil fears (2026-09-28)
  5. bloomberg.com: Treasuries Sink as US-Iran Talks Fail to Assuage Inflation Fears - Bloomberg (2026-09-28)
  6. investing.com: First Light News: Yields RIP Higher as Focus Shifts to Jobs Data | Investing.com (2026-09-28)
  7. tastylive.com: Gold Finally Melts as Bond Yields Surge to 22-Year High. Now What? | tastylive (2026-09-29)
  8. es.tradingview.com: 10-Year Yield Tops 5%, Mag 7 Lead Stocks, Oil Price Uncertainty: 3 Charts To Watch This Week (2026-09-28)
  9. finance.yahoo.com: Stocks wobble as bonds slump to monthly loss - Yahoo Finance (2026-09-29)
  10. biz.chosun.com: Surging yields strip US Treasuries of safe-asset premium, shift buyers to hedge funds (2026-09-29)
  11. pennmutualam.com: Five Percent Is Back | Penn Mutual Asset Management (2026-09-28)
  12. bloomberg.com: Rockefeller's Ruchir Sharma Warns AI Bubble To Burst After 10-Year Yield Hits 5% (2026-09-28)
  13. marketscreener.com: JPM's Bob Michele Says Entire Yield Curve Is Oversold - MarketScreener (2026-09-28)
  14. bloomberg.com: Man Group Says 5.5% Yields Risk Cracking AI Capex, US Consumer - Bloomberg (2026-09-29)
  15. m.economictimes.com: US stocks: US market drops as Trump's rejection of Iran peace plan lifts oil prices (2026-09-29)