Reuters Morning Bid discusses a sharp rise in global bond yields, with the U.S. 30-year Treasury hitting its highest level since 2007, while AI capex, hot inflation, and oil prices are colliding as key macro drivers.
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The segment opens with Amanda Cooper and Mike Dolan framing the day around a bond-market selloff colliding with the AI boom. Mike says the key focus is the U.S. Treasury market, where the 30-year yield has reached its highest level since 2007, a level he treats as meaningful because it predates the financial crisis and comes after years of quantitative easing that suppressed long-end yields. He argues this matters for government borrowing, debt-servicing costs, and mortgages, noting U.S. 30-year fixed mortgage rates are near 6.5% and have stayed above 6% for almost five years. The discussion then turns to equity markets and the AI trade. Amanda notes the S&P 500 and Nasdaq fell on Friday but remain near record highs. …
Near term, the market is vulnerable to another leg of bond weakness if oil stays high and Nvidia fails to reassure on AI demand; that would pressure high-multiple equities and long-duration assets first. If yields back off or Nvidia beats strongly, the AI trade can keep overriding rate concerns.
Over the next few weeks, the setup favors a tug-of-war between persistent inflation/oil pressure and still-strong AI capex. The market likely stays constructive on megacap AI unless long-end yields keep breaking higher and central banks sound more hawkish.
Structurally, this points to a post-QE regime where long-dated borrowing costs stay more relevant to asset pricing and public finance. If inflation shocks remain recurrent, the old 'rates don’t matter' framework for growth equities becomes less durable.
The U.S. 30-year Treasury yield has hit its highest level since 2007.
Central setup of the segment and basis for concern about long-end rates.
The move matters because it raises government borrowing costs and mortgage rates.
Mike links long-end yields to debt servicing and housing costs.
The AI boom is currently strong enough to offset some of the pressure from higher Treasury yields.
Amanda says equities remain near highs because AI capex and productivity hopes are supporting them.
What should we be focusing on in the bond market sell-off — the daily moves or the actual yield levels?
Mike Dolan focuses on the 30-year Treasury yield hitting its highest since 2007 — before the great financial crash. He says this is an incredible marker after years of quantitative easing, and notes it coincides with Kevin Walsh taking over at the Fed with plans to run down the balance sheet where roughly 7 trillion in bonds are still stored, a third in 10-year-plus maturities. He argues it matters for government debt servicing costs, mortgages (30-year fixed near 6.5%), and ultimately collides with the AI boom in equity markets.
Is the bond market sell-off affecting the equity market, given the AI boom?
Amanda Cooper notes the S&P and NASDAQ dropped about 1% on Friday but remain a whisker below record highs. She suggests that as long as the AI boom capex keeps running, even with the 30-year Treasury above 5% — a threshold where things get shaky — it doesn't seem to matter much yet. Mike Dolan adds that Nvidia's report on Wednesday will be a big test, and that the real issue is the world overheating rather than recession, with the Fed having a 50% chance of hiking by year-end, which could break the runaway AI investment boom.
What should markets look for from the G7 finance ministers' meeting?
Mike Dolan says the agenda of global imbalances is broad, but the bond market stress will focus minds. Borrowing costs are rising sharply across the US, Japan (record yields), the UK (political turmoil), and how central banks react is the big factor. The central bank governors are at the meeting, so what they all say together about what's happening in front of their eyes is what markets might trade off — not the final G7 statement itself.
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