--- title: "The World Grapples with a New Wave of Inflation as a \"Long-Term Bond Storm\" Sweeps the Globe" type: "News" locale: "en" url: "https://longbridge.com/en/news/286833007.md" description: "Global bond markets are experiencing their most severe volatility in two decades. The blockade of the Strait of Hormuz has driven up oil prices, while the yield on US 30-year Treasury bonds has surpassed 5%, reaching a new high since 2007. Reignited inflation expectations have completely reversed the narrative of interest rate cuts, with traders now betting on a rate hike by the Federal Reserve in March next year. G7 finance ministers held emergency meetings, and JPMorgan Chase issued a warning: long-end interest rates are rising in global resonance, suggesting that a new era of persistently high interest rates may have quietly arrived" datetime: "2026-05-19T00:41:23.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/286833007.md) - [en](https://longbridge.com/en/news/286833007.md) - [zh-HK](https://longbridge.com/zh-HK/news/286833007.md) --- # The World Grapples with a New Wave of Inflation as a "Long-Term Bond Storm" Sweeps the Globe Global bond markets are standing at a historic turning point. Soaring oil prices triggered by conflicts in the Middle East and rising inflation expectations are pushing US Treasury yields to twenty-year highs, triggering chain-reaction sell-offs in major markets such as the UK and Japan. A new era of persistently high interest rates may have quietly begun. The yield on US 30-year Treasury bonds has crossed the 5% threshold, hitting a new high since 2007. Last week's auction of 30-year Treasuries saw lukewarm demand, failing to spark buyer enthusiasm even at such elevated levels. Meanwhile, market expectations for the Federal Reserve's policy path have undergone a fundamental reversal. **Traders now view a rate hike in March next year as a high-probability event, with the probability of a hike by December standing at approximately three-quarters. This contrasts sharply with late February, when the market expected two interest rate cuts in 2026.** This turmoil in the bond market has weighed on equities and drawn heightened attention from G7 finance ministers, who will dedicate this week's meeting to discussing this round of bond sell-offs. Priya Misra, Portfolio Manager at JPMorgan Chase Asset Management, warned, "Long-end interest rates are rising synchronously globally, often reinforcing each other, and the expectation of Fed rate hikes is also entering the market narrative." ## Iran War Flips the Bond Market Narrative The blockade of the Strait of Hormuz is the core driver of this round of bond market turmoil. Obstruction of this critical global oil transport artery has continuously pushed up oil prices and reignited inflation expectations. Investors generally believe that as long as the standoff in the Middle East remains unresolved, pressure on the bond market will be difficult to dissipate. Priya Misra stated bluntly, "Unless the strait reopens, the interest rate range has shifted upward overall." Data shows that US Treasury yields are currently about 50 basis points or more higher than their levels in late February. The 2-year yield briefly rose to 4.09%, the highest since February 2025; the 10-year yield stood at 4.58%, a near one-year high. Year-to-date, US Treasuries have recorded negative returns, whereas in late February, year-to-date gains had approached 2%. ## Inflation Narrative Dominates Market Pricing The market's primary concern currently is the re-anchoring of inflation expectations. Karen Manna, Fixed Income Strategist and Portfolio Manager at Federated Hermes, stated, "**We are seeing a world truly grappling with a new wave of inflation.**" Kevin Flanagan, Head of Investment Strategy at WisdomTree, expects that the next Consumer Price Index report may show annual inflation reaching 4%, which would be the highest level since 2023—the April CPI already recorded 3.8%. He pointed out, "The inflation narrative is dominating the market, and the bond market is demanding higher premium compensation for holding newly issued Treasuries." Concerns over the continuing expansion of the US fiscal deficit, along with signs of economic resilience despite war-related headwinds, have further strengthened the logic for investors demanding higher term premiums. Last week's Treasury auctions confirmed this: the 30-year auction yield hit 5%, a first since 2007, but demand was flat; investor demand for the 3-year and 10-year auctions was similarly tepid. ## Hike Expectations Reshape Fed Outlook This inflation storm has also placed immense pressure on incoming Federal Reserve Chair Kevin Warsh, causing market bets on rapid rate cuts upon his appointment to fail. Chicago Fed President Austan Goolsbee stated last week that widespread price pressures could even signal an overheating economy; Federal Reserve Governor Michael Barr described inflation as an "overwhelming" risk to the economy. This Wednesday, the minutes from the Fed's April meeting will be released, and the market will closely monitor how much support dissenting voters received among officials. In the latest JPMorgan Chase US Treasury Investor Survey, short positions in Treasuries reached their highest level in 13 weeks, indicating that market bets on further declines in the bond market have significantly intensified. ## Investors Wait on the Sidelines for More Signals Faced with continuous selling pressure, some investors are choosing to remain on the sidelines. Kevin Flanagan stated that he is currently sticking with floating-rate notes and maintaining low interest rate exposure, "preferring to buy late rather than early." He believes the 4.5% level for the 10-year yield is "more of a psychological barrier," and if tensions in the Middle East escalate again, pushing up oil prices, yields may retest last year's high of 4.62%. Hank Smith, Head of Investment Strategy at Haverford Trust, holds a more cautious view. He stated that whether the rise in consumer and producer prices is temporary, "or will extend into 2027," remains an open question requiring more data to determine the direction of the bond market. ### Related Stocks - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [JPX.US](https://longbridge.com/en/quote/JPX.US.md) - [FHI.US](https://longbridge.com/en/quote/FHI.US.md) - [WT.US](https://longbridge.com/en/quote/WT.US.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [Risk of rising yields seen as diminished](https://longbridge.com/en/news/286783443.md) - [Clear Legal Outlook: No Revenue, No Payment](https://longbridge.com/en/news/286876249.md) - [Treasury yields hit 4.6% as oil surge fuels inflation fears](https://longbridge.com/en/news/286649647.md) - [Treasury yields little changed as markets watch global oil inventories](https://longbridge.com/en/news/286783486.md) - [30-year Treasury yield hits 5.13% amid inflation fears](https://longbridge.com/en/news/286668257.md)