A steep selloff in long-dated US government debt has pushed benchmark yields to levels not witnessed in decades, sending ripples across international financial markets. Despite recent soft revisions to the personal consumption expenditures price gauge, the drawdown in government paper has shown little sign of letting up. Persistent strength in economic activity alongside higher oil quotations has reinforced expectations that borrowing costs in the United States could remain elevated for longer, lifting the greenback and dampening appetite across fixed income, foreign exchange, and commodities.
Long-End US Debt Under Intense Selling Pressure
Jim Reid at Deutsche Bank pointed to severe stress unfolding within the US sovereign debt landscape. The 10-year Treasury yield climbed by 4.9 basis points to reach 5.28 percent, marking a fresh peak since 2007. The move at the ultra-long end was even more pronounced, with the 30-year yield jumping 6.3 basis points to 5.63 percent, its highest mark since 2002.
Shorter maturities experienced notable intraday volatility. Following the release of the PCE figures, the 2-year Treasury yield initially slipped to an intraday low of 4.825 percent as market participants briefly scaled back expectations of an interest rate increase by the Federal Reserve in October. However, that repricing failed to hold across the curve, and the 2-year yield eventually settled 1.1 basis points higher at 4.89 percent. Rising real yields alongside month-end portfolio positioning have amplified the rout. The strain extended across the Atlantic as well, with the Franco-German 10-year government bond yield spread widening to 127 basis points, a level unseen since 2012.
Broad US Dollar Strength Weighs on Major Currencies
The upward momentum in US Treasury yields has provided robust support to the greenback, leaving rival currencies on the defensive. The euro tumbled against the dollar to 1.1312, touching its weakest level since May 2025 and trading well below its January high of 1.2082. While a potential inflation shock in the euro area could theoretically offer the single currency an unexpected buffer, renewed worries surrounding European energy vulnerability combined with broader geopolitical tensions continue to suppress euro demand.
Against the Japanese yen, the dollar hovered above 158.00 at the upper boundary of its weekly trading range during Thursday's Asian session. Broad US dollar momentum has largely neutralized expectations of tighter monetary policy from the Bank of Japan, as well as the risk of currency intervention by Japanese authorities. Moreover, safe-haven demand stemming from the ongoing standoff between the United States and Iran has offered an extra tailwind to the dollar.
The Australian dollar also remained subdued against the greenback, consolidating around the mid-0.6900s near a two-month low. Data showed that Australia's trade surplus contracted sharply to 495 million Australian dollars in August, though the release had minimal direct influence on exchange rate fluctuations, as global macro drivers dominated the currency's trajectory.
Precious Metals Retreat as Capital Rotates Out of Risk Assets
Surging yields on sovereign debt have taken a toll on non-yielding assets, most notably bullion. Gold struggled to sustain momentum after edging toward the 4,200 dollar mark, trading virtually flat during the first half of the European session. Despite weaker inflation prints, the unyielding advance in US sovereign yields and the persistent rally in the greenback have diminished the appeal of holding gold.
Digital assets have similarly reflected a cautious tone among traders. Hyperliquid, trading under the ticker HYPE, fell 2 percent on Thursday, giving back part of its 5 percent advance from the preceding trading day. Weakening institutional interest was underscored by 5 million dollars in outflows on Wednesday, dampening sentiment and keeping the price capped below the 90 dollar threshold. Across asset classes, market participants continue to navigate the twin headwinds of elevated crude prices and multi-decade highs in benchmark borrowing costs.
