''Life and death line'' completely collapsed! Inflation panic sweeps global bond market, risk assets tremble with fear.

The tense situation in the Middle East has driven oil prices higher, inflation concerns are on the rise, leading to a escalating global bond sell-off. US Treasury bonds faced a massive sell-off on Monday, pushing the 30-year bond yield below the "life-or-death" 5% level, putting immense pressure on global risk assets. Due to US President Trump's increased pressure on Iran and calls for an end to the war, oil prices continue to rise, with the 30-year US bond yield briefly rising by 4 basis points to 5.16%, the highest level since October 2023. The 10-year and 2-year bond yields in the US touched 4.63% and 4.10%, respectively, reaching the highest levels since February 2025. The 30-year bond yield in Japan surged to a new high since its issuance in 1999, while Australian and New Zealand bond prices also fell in sync. "No anchor point above 5%"! Global bond market in severe turmoil Bond traders have always seen the 5% level of the 30-year US bond yield as a "warning line", believing this point would attract funds to buy low. However, the soaring long-term borrowing costs could overturn this view and indicate that the US Treasury market with a size of $31 trillion will enter a new trading range. The US Treasury market is the benchmark for the global bond market. The long-term US bond yield reached the highest level since October 2023 Guneet Dhingra, the chief interest rate strategist at BNP Paribas in the US, stated "there is no anchor point above 5%." He advised clients to set the target range for the 30-year US bond yield at 5.25% to 5.5%, and pointed out that "the sensitivity of long-term bond holders to prices is significantly increasing." Market concerns about the blockade of the Hormuz Strait leading to soaring energy prices will force global central banks, including the Fed, to maintain high interest rates. Added to worries about the US budget deficit and signals of stronger than expected economic resilience, investors are demanding higher premiums to hold long-term government bonds. Since the US and Israel launched attacks on Iran at the end of February, there has been a dramatic change in the bond market. Previously, traders bet on the Fed's interest rate cut twice later this year by 25 basis points each time; now, the interest swap market almost certainly predicts a rate hike in March 2027. The bond sell-off has already reflected on government financing costs. The 30-year US bond issued in mid-May saw the accepted rate break 5% for the first time since 2007, and even at such a high interest rate, investor demand remains subdued. If the sell-off continues, the rise in yields will push up US mortgage and corporate loan rates, threatening the growth momentum of the world's largest economy. This situation has led to speculation about related US government policies, with US government officials already starting to shorten borrowing terms. This sell-off is spreading: the 30-year UK bond yield approaches 6%, Germany's long-term rates hit a new high last Friday since 2011, and the Australian long-term bond yield also hit a historical high. As the premier safe-haven asset globally, the fluctuations in US bond yields are triggering a chain reaction worldwide. Eugene Leow, senior interest rate strategist at DBS Bank in Singapore, said, "The combination of war and lingering global economic resilience is significantly increasing the risk of overheating inflation in G10 countries. The current situation is more like developed markets taking turns to reprice interest rates, with each country adjusting to a higher interest rate environment." "The door to hell is open": Yields breaking 5% could trigger deleveraging Michael Hartnett, chief investment strategist at Bank of America, previously warned that the 30-year US bond yield "completely breaking below 5%" is like opening the door to disaster. Historical experience shows that asset bubbles bursting are almost always accompanied by a rapid rise in long bond yields: in 1989 in Japan and on the eve of the US stock market collapse in 1999, long-term bond yields saw steep increases of 200 basis points. Currently, the Nasdaq and the 10-year US bond yield are rising in tandem, highly similar to the turning points of 1989 and 1999. Hartnett warned that an accelerated rise in long-term rates could trigger a massive wave of deleveraging, putting global risk assets under severe pressure of a sharp decline. He bluntly stated that early June would be an excellent window for profit-taking. The current frenzy of funds pouring into the stock market and heavy buying of tech stocks is likely to encounter a turning point in the next few weeks, and investors are advised to seize the opportunity to reduce positions at higher levels. On Monday, the futures of the three major US stock indexes fell, with European Stoxx 50 futures widening their decline to 1.1%. South Korea's KOSPI index plunged 4.7% after the market opened on Monday, but later recovered slightly. The Nikkei index in Japan fell 0.9% in early trading.