The 10-year Treasury yield is hovering around 4.67%, its highest level since January 2025, while the German 10-year Bund reached 3.20% this Tuesday, a level that has not been seen since 2011. In Japan, the 10-year yield surpassed 2.8%, hitting a near 29-year high, confirming that the pressure on long-term rates has become a global phenomenon and can no longer be attributed solely to concerns over the US deficit.

The primary driver stems from energy, as the longer oil prices remain high, the less central bankers can treat the inflationary shock as "transitory". In the United States, Fed funds futures, which still priced in two rate cuts for 2026 following the December meeting, now assign an approximately 50% probability to a hike by December. In the eurozone, the shift is equally pronounced; while the ECB was still perceived at the start of the year as being settled in a pause phase, the market is now anticipating a hike in June and another later in the year. In Japan, the change relates less to direction than to timing, as the Bank of Japan was already committed to gradual normalization in January, but nearly two-thirds of economists surveyed by Reuters now expect a hike to 1.0% as early as June, followed by another increase in the fourth quarter.

However, the rise in bond yields also appears to be due to improving economic prospects, as the 10-year yield on US Treasury Inflation-Protected Securities (TIPS) climbed back to 2.10% on May 15. This trend is consistent with better-than-expected macroeconomic data (with the US Citi Economic Surprise Index rising since late April), as well as a particularly robust corporate earnings season. According to FactSet, 84% of S&P 500 companies that have reported their accounts beat earnings expectations, while Q1 earnings growth reached its highest level since Q4 2021.

This surge in long-term yields strengthens the competition from bonds against other asset classes, helping to explain the recent pressure on equity markets and gold. Barring a rapid easing of oil prices, the rise in long-term rates could persist until it begins to spark concerns regarding economic growth.