Contributing to the selloff in the asset class, Japan — which has the developed world’s lowest interest rates thanks to its ultra-easy monetary policy — saw weak investor interest when selling 20-year notes Thursday.

The yield on a Bloomberg index for total returns on global sovereign debt rose to 3.3% Wednesday, the highest since August 2008. Sovereign bonds worldwide have handed investors a loss of 1.2% this year, making the asset class the worst performer across Bloomberg’s major debt indexes. 

It’s a reversal from the start of the year, when optimism that rate hikes were close to ending sent global bonds soaring, with the Bloomberg Global Aggregate benchmark jumping more than 3% in January for its best opening month to a year on record. The gauge slid Wednesday to be down 0.1% for the year.

Eoin Treacy's view

Treasury yields have been up for six consecutive days so a pause in the region of the October 2022 peak is quite likely. That would help to unwind the short-term oversold condition.

However, the medium-term challenge is GDP Now is at 5.75%, unemployment is still very low and inflationary pressures are still well above target. There is not much to stop the Fed from continuing to raise rates.