Rabobank’s RaboResearch Global Economics & Markets notes that US Treasury yields ended Q3 sharply higher, with 10-year and 30-year yields reaching levels last seen in 2002. The report highlights concerns from major market commentators about bonds and equities, and warns that another phase shift higher in long-dated US yields could take them into ranges seen during the late Cold War period.

Long yields revisit Cold War ranges

“Q3 went out with a bang. US Treasury 2-year yields were little changed on the day at 4.89% but 10s spiked 5bps to 5.30% and 30s +6bps to 5.63%, the highest since June 2002.”

“French 30s were +9bps to 5.46% with Le Spread over Bunds now 152bps. As the Financial Times talks of a “vicious loop” of selling, Bill Gross states, ‘Don’t own bonds and be cautious with stocks’, while the Wall Street Journal counters ‘Money Managers are asking clients to give the bond market another chance’.”

“That’ll arguably be down to how Cold and Hot War things get: another phase shift higher in US 30s and we’d be in the 7.25-8.00% range of the late Cold War period.”