Global government bond yields continued to rise this summer, with 30-year U.S. bonds reaching their highest level since 2011 and other benchmark indices returning to 2008. Resilient economic data has challenged the notion that the end of rate hikes might not be near.

Treasury bonds led the global debt sell-off, as the U.S. economy defied expectations that more than five hundred basis points of interest rate hikes by the Federal Reserve would lead to a recession. The minutes from the recent FOMC meeting were not reassuring, with members still concerned that inflation would not retreat, necessitating further rate hikes.

Japan, the world’s lowest interest rate in the developed world, saw low investor interest in selling 20-year notes last week. The 10-year U.S. rate approached 4.31%, just a few basis points from its 2022 peak. The 30-year rate crossed 4.42%, slightly surpassing last year’s high. The 10-year U.K. yield jumped to a 15-year high, while its German counterpart approached its highest level since 2011.

For the majority of investors, this is a complete turnaround. A naive optimism prevailed, suggesting that rate hikes were about to end. The Bloomberg Global Aggregate benchmark jumped over 3% in January for its best-ever one-year opening month. The gauge was now negative as of Monday.

Higher yields in the U.S. continue to attract buyers. Investors have poured $127 billion this year into funds that invest in Treasury bonds, on track for a record year. Emerging markets continue struggling to attract capital in a geopolitical environment complicated by a never-ending war in Ukraine and tensions over Taiwan.

While the FED’s quarterly projections last updated in June showed most monetary officials favoured two more hikes in 2023, Chairman Jerome Powell emphasised after the July decision that the Fed would take things meeting by meeting. 
Still, some public remarks from FOMC officials suggest that the strong consensus underpinning the aggressive tightening campaign of the last year and a half might begin to wane. Some, like Philadelphia Fed President Patrick Harker, have indicated that the central bank might not need to continue raising interest rates. Others, including Fed Governor Michelle Bowman, have taken the opposite view. 
Informed observers will closely watch the Kansas City Fed’s annual Jackson Hole conference in Wyoming next week. However, at this stage, another rate hike at the following September meeting is likely.