US Treasury yields surpass 5.2%, sparking memories of the 2007 crisis as bond vigilantes return
- Societe Generale analyst Albert Edwards stated in a research report titled “Nothing to See… Just a Bond Market Meltdown” that the US 30-year Treasury yield has surpassed 5.2%, matching its June 2007 level—just months before the start of the global financial crisis. He believes the market is showing excessive complacency towards high borrowing costs, echoing previous patterns seen before economic upheaval.
- Economist Ed Yardeni noted that “bond vigilantes”—fixed-income investors who express dissatisfaction with fiscal or monetary policy by dumping government securities—are back in action. He expects this will force the Federal Reserve to take a hawkish turn at its June policy meeting and possibly raise rates in July, a dramatic reversal from the previously widespread expectation of rate cuts.
- Data shows that the annualized inflation rate accelerated to 3.8% in April, the fastest pace since May 2023. Futures markets have shifted significantly: investors now assign a 49% probability that the federal funds rate will be higher by the end of 2026, while the chance of a rate cut by year-end has dropped to just 2%.
- From a trading psychology perspective, Edwards also identified Japan as the new source of financial tension: Japan’s 10-year government bond yield has climbed to the highest level since 1996, with the Bank of Japan withdrawing from years of ultra-loose monetary policy—tightening global financial conditions. He also pointed out that rising tensions between the US and Iran have pushed up energy costs and sustained inflationary pressures. While Yardeni believes the bull market in equities is not yet in imminent danger and can be seen as an opportunity to accumulate, both agree that the bond market is emitting warning signals that should be taken seriously.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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