30-year US Treasury yield nears 18-year high as Trump tax bill triggers global bond selloff

The 30-year Treasury yield in the United States surged to 5.14% on Thursday, putting it dangerously close to the 5.18% high from 2007, according to data from CNBC.

That level hasn’t been touched in nearly two decades, and traders on Wall Street are already sweating. This spike followed a combination of two major events: President Donald Trump’s tax bill clearing the House late Thursday and Moody’s downgrade of US credit over rising deficits.

That was enough to wipe out over 800 points from the Dow Jones Industrial Average, a 1.9% drop, while the S&P 500 fell more than 1%. The move also disrupted a six-week bounce that had been building since early April.

Trump’s tax bill sends Treasury yields soaring

Trump’s newly passed tax bill is being blamed for fanning the flames. The 30-year Treasury yield also crossed the 5% line for the second day in a row, with Thursday’s close holding around 5.088%. Meanwhile, the 10-year yield jumped over 15 basis points since Monday.

JPMorgan analysts highlighted 11 cases in the past year where the 10-year moved more than 10 basis points in a day. In seven of those, the S&P 500 closed lower, with losses averaging 0.8%.

Retail wasn’t spared either. Bank of America cut Target’s stock rating to neutral, following weak Q1 earnings. Analyst Robert Ohmes wrote that even though Target’s valuation is near 10-year lows, the top-line performance is still struggling.

“With softer sales driving higher markdowns and thus incremental margin pressure for TGT,” Robert wrote, “the company is now well underperforming peers,” like Walmart.

Selloff spreads as global bond markets recoil

What started in the US has now spread across the world. A global selloff is ripping through long-term government bonds. Trump’s tax plan and Moody’s downgrade have investors reevaluating fiscal risks—not just in America, but everywhere.

Rong Ren Goh, a fixed income portfolio manager at Eastspring Investments, said these kinds of events “tend to bring fiscal concerns front and center of investors’ minds,” causing them to adjust what kind of risk premium they demand to hold longer-dated bonds.

In Japan, things are unraveling fast. The 40-year bond yield spiked to a record 3.689% on Thursday. The 30-year is hovering near its own all-time high at 3.187%, and the 10-year yield rose 9 basis points this week to hit 1.57%.

Japanese life insurers—who used to be consistent buyers—aren’t purchasing these bonds anymore since they’ve already met their capital requirements. Add to that the Bank of Japan’s push toward tightening policy, and it’s a recipe for more selling.

Vishnu Varathan, a managing director at Mizuho Securities, didn’t mince words. He said, “Markets do not find Trump’s ‘big, beautiful tax bill’ beautiful at all… USTs were beaten up in an ugly sell-off.”

George Saravelos, the global head of FX strategy at Deutsche Bank, warned that rising Japanese yields make local bonds more attractive, pushing investors to sell off US government debt even faster. That kind of divestment from Treasurys just puts more pressure on the American market.

Germany’s bunds are also seeing major damage. 30-year yields jumped more than 12 basis points, and the 10-year climbed over 6 points. Varathan noted that Germany’s own deficit problems are likely structural and adding to the pressure. Across Europe, the selloff is spreading. 30-year bond yields rose more than 12 basis points this week, and the 10-year yields are up around 7 points.

Steve Sosnick, chief strategist at Interactive Brokers, summed up investor mood: “Investors don’t really have much love for long duration bonds right now.” He said concerns about global inflation are “a killer” for longer bonds, which are more influenced by long-term expectations than short-term central bank decisions.

Not all countries are seeing this trend. India and China are showing small declines in yields. India’s 10-year government bond yield dropped about 2 basis points since Monday, while China’s slipped slightly as well. That’s partly because these countries are more inward-focused and have tighter capital controls.

But in most major markets, the picture’s clear: investors are losing trust in long-term government debt. And Trump’s tax bill just threw gasoline on the fire.

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