Treasury yields surge to multiyear highs

Treasury yields continued to rise for the ninth week in a row, as the Fed pushed its rate hike forecast to 4.4% for 2022. 

The benchmark 10-year U.S. Treasury yield jumped from 3.46% to 3.69%, its highest level since 2011, while the 2-year note climbed to 4.20%, a record high since 2007. It’s worth noting that the yield curve has inverted to levels not seen since the early 80s recession. In Europe, the German 10-year yield added 32 basis points (2.02%) while the French OAT yield with the same maturity closed at 2.60% (+28 basis points).

Surging yields triggered a bloodbath in all bond classes. Investment grade corporate bonds posted their biggest weekly percentage decline in Europe since mid-August (-1.56%). It was even worse in the U.S. (-2.52%, the poorest weekly performance since March 2020). That results in a year-to-date loss of 19.89% for the Bloomberg Barclays Global Aggregate Corporate Bond TR Index in USD. 

High-yield bonds also took the Fed’s hawkish pivot on the chin (-1.16% in Europe, -1.72% in the U.S.). Emerging debt in local currencies fell 1.89% (-19.45% YTD) in the wake of a strong greenback and murky outlook. The U.S. Dollar Index crossed the 113 mark, its highest level in two decades.