By Alun John and Amanda Cooper
LONDON, Oct 1 (Reuters) - Global bond markets came under a brief bout of early pressure on Thursday that kept Treasury yields at their highest in decades, while stocks were relatively unscathed thanks to AI chipmaker Micron's blockbuster earnings that supported tech shares.
The 10-year US Treasury yield, a yardstick for global borrowing costs and asset prices, rose to as much as 5.34%, its highest since 2002, before dip buyers stepped in, which brought it back to 5.27%.
It posted its biggest quarterly rise this century in the three months to September, with the selling pressure also rippling through bonds in France, Britain and Japan.
Yields have been surging around the world as soaring energy costs fan inflation and as the boom in AI and data centre building lifts expectations for growth and for where short-term interest rates will settle.
Stalled peace talks between the US and Iran to end the seven-month-long war in the Middle East have kept crude prices elevated. Brent futures surged 42% in the July-September quarter, and the December contract, the current benchmark, was last at $100 a barrel.
"We have had a prolonged selloff in bonds — they have been correlated with oil prices and also we've had strong US data," said Rory McPherson, chief market strategist at Wren Sterling.
"We don't have enough buyers who want to buy bonds."
European shares were among the worst performers earlier in the day, when the broad STOXX 600 fell as much as 1.5%, before recovering some of those losses to trade down just 0.4%. US share futures managed to hold steady.
MICRON EARNINGS HELP TECH
Helping the US were high-stakes earnings from Micron, a key supplier to AI bellwether Nvidia. They signalled strong demand for AI memory chips, with financial commitments under long-term supply agreements at $32 billion, up from $22 billion in June.
"Micron's numbers are another strong validation of AI and memory demand, but markets may increasingly be asking whether we are closer to peak memory shortage, even if demand continues to exceed supply," said Charu Chanana, chief investment strategist at Saxo.
BOND DIP BUYERS ARRIVE, BUT FOR HOW LONG?
Global yields surged in September as bond prices tumbled, with investors bracing for a period where interest rates stay higher for longer.
Market focus has been on how long US Treasury yields stay above the psychologically important 5% level while some investors even weigh the possibility of yields breaching 6%.
The US 10-year yield gained 87 basis points in the third quarter, the biggest quarterly rise since 1994, LSEG data showed.
France's 10-year yield gained 120 basis points in the quarter, the most since 1987, and its yield briefly jumped by a further 10 basis points on Thursday to 4.96%, closing in on the symbolic 5% level.
It too then eased back and was last down 2 bps at 4.82%, though the French budget process is keeping investors on edge.
“The only way really I can see the market being calmed here is if we do see governments taking the hard decisions to cut spending and it doesn’t look like that is going to happen," Fiona Cincotta, senior market analyst at City Index, said.
Yields in Japan have also hit multi-decade highs, while Britain's 30-year yield nudged above 6% for the first time since early 1998.
In currency markets the winner from the bond selloff has been the dollar, which was stronger again on Thursday.
The euro fell by as much as 0.5% to its lowest since May 2025, before recovering in line with European stocks and bonds. It was last down 0.3% at $1.1297, while the pound was down 0.2% at $1.323.
Gold was up 0.5% at $4,176 an ounce.
(Additional reporting by Ankur Banerjee in Singapore; Editing by Gareth Jones, Kirsten Donovan)
