US Bond Sell-Off Sends Shockwaves Through Global Markets

Global bond markets are experiencing a sell-off, causing borrowing costs to rise in the United States. The US government is now paying more to borrow money than at any point since before the financial crisis of 2007.

The 30-year Treasury yield has surpassed 5.18%, its highest level since 2007, while the 10-year note climbed to around 4.6-4.7%, a year-over-year high. The ongoing war in Iran has driven up oil prices, and US producer prices jumped 6.5% year-over-year in May, their highest rate since late 2022.

The federal government's debt burden is also contributing to the sell-off. With approximately $39 trillion in total debt, annual interest payments alone are approaching $1 trillion. This has led Bank of America analysts to label US fiscal policy as the 'elephant in the room', with higher yields pushing up the deficit and increasing borrowing costs.

The consequences of this sell-off are being felt across asset classes, including crypto markets. Bitcoin experienced over $1 billion in ETF outflows during May, a purely macro trade driven by investors rotating out of risk and into safety.