30-year Treasury yield tops 5.18%, highest since before the financial crisis

Yields on U.S. Treasurys advanced Tuesday as investors continued to dump bonds on fears inflation is reigniting. The 30-year Treasury yield hit the highest level in nearly 19 years.

The longer-dated 30-year Treasury bond yield rose 4 basis points higher to 5.189%, its highest level since July 2007.

The 10-year U.S. Treasury note yield — the key benchmark for mortgage and auto loans and credit card debt — added 6 basis points higher to 4.683%, the highest since January 2025. The 2-year Treasury note yield, which reacts to expectations of short-term Federal Reserve interest rate moves, rose by more than 3 basis points to 4.135%.

One basis point equals 0.01%, and yields and prices move in opposite directions.

Spiking oil prices from the U.S. conflict with Iran showed up in a series of inflation reports last week, which spooked fixed income investors and caused traders to bet the next move by the Federal Reserve could be a hike, instead of a decrease.

"It's a real problem," said Jim Lacamp, senior vice president at Morgan Stanley Wealth Management, on CNBC's "Squawk on the Street." "When we started this year, everybody expected rates to come down — that was part of the bull case. Now, it looks like we're going to see a rate hike."

The prevailing sentiment across global bond markets is being driven by the impact of higher inflation, primarily caused by soaring energy costs, as well as deficit concerns and, in the U.K., country-specific political turmoil, said Mohit Kumar, chief economist and strategist at Jefferies.

Even with a Middle East deal, Kumar told CNBC's "Europe Early Edition" that he did not expect oil to fall to pre-war prices.

"We think it's going to be 25-30% higher in six months' time," Kumar said.

Brent crude, the international oil benchmark, last traded about 1.5% lower at $110.38 a barrel. U.S. West Texas Intermediate was little changed at $108.67.

Kumar also highlighted the effect of yawning government deficits. "Every government is going to provide subsidies for households for fuel — which means we have more borrowing, and that's a pressure at the long end of the curve," the economist said.

While the market is currently pricing in rate hikes, he said that "it's not justified" given that inflation is likely to rise as much as growth is likely to fall.

30-Year Treasury yield

A Bank of America survey published Tuesday showed 62% of global fund manager respondents expect 30-year Treasury yields to hit 6%, equaling the highest level since late 1999 and an increase of about 85 basis points from current prices. Only 20% of respondents are targeting a 30-year yield of 4%.

Yields on longer-term government debt in the U.K. and Germany are also elevated.  The yield on German 30-year bunds stood at 3.684% Tuesday, with Britain's 30-year gilt yield rising less than 1 basis point to 5.773%. Japan's 30-year yield hit a record this week.

The jump in yields threatens to hit the U.S. consumer and undermine the stock bull market. U.S. stocks have been under pressure recently as yields have spiked.