IMF says bond markets orderly as Treasury yields soar

The International Monetary Fund said on Thursday that global bond markets are still working in an orderly way. The statement came after a sharp selloff in government debt pushed borrowing costs around the world to their highest levels in decades.reuters

"What we see globally is that bond markets are continuing to function in an orderly manner," IMF spokesperson Julie Kozack told reporters at a press conference, according to Reuters.marketscreener+1

The comments are the IMF's most direct response yet to the turmoil in bond markets. They came less than two weeks before the IMF and World Bank Group Annual Meetings, which will be held in Bangkok from October 12 to 18.imf

Yields at multi-decade highs

The yield on the 10-year U.S. Treasury note is the benchmark for borrowing costs and asset prices around the world. It rose as high as 5.34% on Thursday, its highest level since 2002. Reuters reported that the yield had its biggest quarterly rise this century in the three months through September. The selling also spread to government bonds in France, Britain and Japan.investing+3

The 10-year yield later eased slightly, according to Trading Economics, which said it was about half a percentage point higher than a month earlier and about 1.2 points higher than a year earlier. Federal Reserve data show the yield stood at 5.11% on September 23, so it has risen quickly in a short time.tradingeconomics+1

In September, the Committee for a Responsible Federal Budget warned about the cost of higher rates. It said the 10-year yield was already more than 60 basis points above Congressional Budget Office estimates. If rates stayed that high, the group said, it would add about $2.3 trillion to U.S. debt over the next decade.crfb

Energy shock adds to inflation pressure

Kozack also said energy prices remain a challenge for the world economy. Prices of diesel, gasoline and jet fuel are between 60% and 97% higher than before the conflict began. She said that reflects both the effects of the Iran war and limited global refining capacity.investing+1

"The energy crisis, which is one of the factors fueling headline inflation, is not over yet," Kozack said, according to Reuters' Spanish-language report.marketscreener

The IMF's message is that markets are under strain but still working. The open question is whether that holds if energy-driven inflation keeps pushing yields higher.