The 30-year Treasury yield reaches its highest level since 2002

The US 30-year Treasury yield topped 5.6%, its highest level since 2002^1,3. The long bond cleared that level for the first time since 2002². One analysis put the 30-year at 5.62%⁴. Another set out the curve in detail: the two-year at 4.92%, up from 4.39% on September 1, and the 30-year at 5.56%, up from 5.27%, with the 10-year at 5.24%⁹. Semafor reported that the yield on 30-year Treasurys briefly hit its highest level since 2002⁸.

Equities gave ground as the long end climbed. New York stocks fell for a second day as the 30-year hit a 24-year high⁵. Stocks fell as long-term yields reached that 24-year high⁶, and the surge in long-term Treasury yields drove the New York decline⁷.

The two accounts of the belly of the curve differ. A market summary published the same day listed the 10-year yield surging over 5.05% to a 19-year high, while the detailed curve analysis put the 10-year at 5.24%^1,9.

Why it matters to investors

Fed commentary was part of the move. Fed Governor Michael Barr raised the possibility of further tightening, highlighting a divergence within the central bank⁵, and repeated the warning that further rate increases will likely be needed to slow inflation⁶.

The repricing is not contained to Treasuries. Canada has seen some spillover into its bond market, with its yield curve sitting well below that of the US². Bonds were set for a bruising September even as stocks fared better^10,14. Municipal trading jumped to its highest since at least 1995, with some 117,419 municipal bond trades reported on Monday¹³. In the third-quarter selloff, high-yield bonds fared best, with losses of 0.6%¹².

What to watch

US Treasuries are considered among the world’s safest and most liquid assets, so a rise in their yields pulls at global capital flows and at currencies including the rupee¹¹. Morningstar flagged the booming issuance of debt as the factor looming largest over the bond market going into the fourth quarter¹².

Investors can watch whether the long end keeps leading the move, and whether the Fed treats the level as a signal it cannot ignore^3,4. Treasury officials have said little publicly about the selloff³.

Morningstar’s question for the fourth quarter is whether the third-quarter losses continue¹². Business Standard framed the same move as a question about global capital flows, naming the rupee and the Reserve Bank of India’s policy repo rate among the things that reprice when US yields rise¹¹.