US 30-year bond yields have reached 5%, an important milestone. This level was hit before but didn’t hold. The current market dynamics suggest we may see a different outcome now. Worldwide, long-term yields are on the rise too. UK 30-year yields went up by 4 basis points to 5.73%. In France, they increased 2 basis points to 4.52%. Japan’s 30-year yields hit 3.28% today. For US bonds, the 5% mark is crucial, especially with upcoming labor market data and insights from the Federal Reserve. Following the Jackson Hole symposium, the US yield curve is steepening. With US 30-year yields testing 5%, we should be ready for heightened market volatility. This week’s labor market report is essential because strong data could drive yields even higher. The latest JOLTS report showed job openings unexpectedly increased to 9.8 million, indicating the Federal Reserve may continue its firm stance. This uncertainty makes options on Treasury futures appealing for hedging or speculation. The MOVE Index, which measures bond market volatility, has risen to 135, its highest since the regional banking issues we saw earlier in 2025. We should think about strategies like straddles to benefit from significant price swings, regardless of direction, after the jobs data is released. The steepening yield curve suggests the market is preparing for either higher inflation or stronger growth in the future. A classic steepener trade, which bets that long-term rates will rise faster than short-term rates, could be a good move. This approach has gained attention since the Fed Chair’s hawkish comments at Jackson Hole last month. These higher yields pose a risk to stock valuations, particularly for growth and tech stocks sensitive to discount rates. The Nasdaq 100 has already dropped over 4% since late August. If the 30-year yield stays above 5%, we could see a more significant market correction. It may be wise to consider protective puts on stock indices like the QQQ if bond market pressures persist. This situation feels different from the brief yield spikes we noticed in the first half of 2025, which quickly reversed. The current global bond sell-off, with rising yields in the UK and Japan, resembles the lasting pressures we felt in late 2023. We must acknowledge the potential for this to be a lasting shift in interest rates, rather than just a temporary concern.

here to set up a live account on VT Markets now