30-year US Treasury yield: Is the next stop 5.5%?

```

Inflation concerns are driving up long-term U.S. Treasury yields, and market confidence in the “buy on dip” strategy is starting to waver.

According to Bloomberg, Citi macro rates strategist Jim McCormick pointed out that bond traders have now set the next key integer level for the 30-year U.S. Treasury yield at 5.5%, after the previously seen “buying threshold” of 5% was breached. The 30-year U.S. Treasury yield has now risen to 5.16%, approaching its highest point since 2007.

Barclays and BNP Paribas warn that the current round of selling may not be over, as elevated energy prices continue to push up inflation expectations. McCormick emphasizes that core inflation has not significantly cooled, and the U.S. economy shows resilience. This means it will be difficult for the Federal Reserve to cut rates in the short term, leading investors to reassess the value of holding long-term U.S. government bonds.

The repricing of rate expectations has triggered a global chain reaction. Swaps markets show traders are betting the Fed will hike rates by 25 basis points by March 2027—a stark contrast to market expectations of rate cuts before the Middle East conflict. McCormick says bluntly: “The market underestimates the risk of the Fed beginning to hike rates this year.”

Bond Market Selloff Sweeps the Globe, Risk Assets Face Pressure

This rise in U.S. Treasury yields is not an isolated phenomenon but rather a microcosm of the global bond market repricing. This week, Germany’s 30-year government bond yield rose to a fifteen-year high, and Japan’s equivalent hit the highest level since that bond’s debut in 1999.

In the U.K., fiscal concerns triggered by Prime Minister Starmer’s party leadership challenges have similarly become a central issue for investors. Long-term rates in major global economies are rising in tandem, reflecting deep market anxieties about persistent inflation and the path of monetary policy.

Despite the continuing wars, risk assets have recently rebounded—the MSCI Developed Markets Index has risen more than 10% from its March low—but concerns are mounting that high risk-free rates will ultimately undermine this rally.

Citi strategist McCormick gave a clear warning: “For the global economy, the biggest risk is the magnitude of the shock to global bond yields. If U.S. long-term yields continue to rise, it will create a rather unstable equilibrium for risk assets such as stocks and corporate bonds.” This view implies that moves in the bond market have now become a core variable in global asset allocation.

Risk Disclosure and DisclaimerThe market involves risks, and investment needs caution. This article does not constitute personal investment advice, nor does it take into account individual users’ special investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situations. Investments made on this basis are at your own risk. ```