economics

U.S. 30-Year Yield Hits Highest Since 2015 as Selloff Escalates

  • Demand from pensions had kept long Treasuries mostly contained
  • Gundlach has cited ‘pivot point’ to gauge fate of bull market

Pinebridge's Slim Says Treasury Yields to Remain Under Pressure

The 30-year U.S. Treasury yield rose to its highest level since 2015, showing that this year’s selloff has spread to the most-resilient part of the world’s biggest bond market.

The yield on the long bond surpassed 3.2322 percent, the previous 2018 high set Feb. 21, to reach 3.2379 percent on Thursday, highest since July 2015. It follows the 10-year borrowing benchmark in setting multi-year highs as traders grapple with surging Treasury issuance and a Federal Reserve that appears intent on boosting rates further.

The 30-year bond is under pressure from inflation expectations hovering near the highest since 2014. Yet relative to the rest of the yield curve, the maturity has lagged in convincingly breaking to higher yields because of demand from pension funds and life insurers. The latest move suggests that even those buyers can’t keep the lurch upward in yields contained to shorter-dated obligations.

To Jeffrey Gundlach, chief investment officer at DoubleLine Capital, the 30-year yield at 3.22 percent on a closing basis represents the “one last pivot point” in Treasuries.

“The last man standing, and it’s really not standing very sturdily anymore, is the 30-year Treasury,” Gundlach said in a presentation in New York last month. If that 3.22 percent mark is broken convincingly, “it is not possible to make a chart case that there is anything supporting a bull market label to the bond market.”

Even so, most analysts don’t expect long-term rates to skyrocket from here. The median estimate in a Bloomberg survey of 49 analysts is for the 30-year yield to end 2018 at 3.4 percent. The responses are as of May 10.

Yields are jumping across the curve as bond traders price in a quicker pace of Fed rate increases. They expect about 2.5 additional quarter-point hikes in 2018, even more than the central bank’s projections, according to fed funds futures data compiled by Bloomberg.

— With assistance by Masaki Kondo

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