ORLANDO, Florida (Aug 19): The widespread sell-off across global sovereign bond markets deepened on Tuesday, pushing long-dated yields to fresh multi-decade highs and rattling stocks, while investors also grappled with the inflationary signal from global oil prices hitting a three-week high.

In my column today, I dig into the latest "TIC" flows data for June. Official sector demand for US debt has been flat-lining ​for some time, and central banks have also chalked up record sales of T-bills in recent months. So the last thing Treasury needs is foreign private ‌sector demand to cool too. Yet this may be happening.

Government bond yield curves around the world are steepening, mostly driven by the long end as investors get increasingly twitchy about inflation, public finances, and policymakers' ability — or willingness — to get them under control. Some of the moves have been quite dramatic, especially in the US, where the spread between the 30-year yield and fed funds rate — ultra-long end vs ultra-short end — is the widest in four ​years.

But isn't this simply more a case of returning to long-term averages than a cause for concern? Curves have been so flat for so long, partly thanks to central bank ​QE and forward guidance. Indeed, the US 2s/30s curve was negative during 2023 and 2024. And surely 30-year borrowing costs should be substantially higher than the overnight rate. The worry is the pace of adjustment, ‌not the ⁠path.

Some analysts argue that the selling pressure bearing down on Treasuries is due to the "crowding out" effect of surging corporate bond issuance. As a flood of new bonds hits the market, especially from Big Tech, there's less capital to go round. If investors buy more corporate bonds, demand for sovereign debt weakens, prices fall, and yields rise.

Some say it's a compelling argument, but others dismiss the theory. What cannot be dismissed is the rise in corporate bond issuance. 2026 will be a record year. Issuance so far this year has totalled almost US$1.7 ​trillion (RM6.9 trillion), according to Sifma data, up around 27% ​on the same period a year earlier ⁠and well on the way to beating last year's record US$2.2 trillion. August issuance has already outpaced July's total. As yet, no tipping point.

'Europe is back on the map for investors, but is it worth the trip?

The impact on commodity and energy markets from the closure of the Strait of Hormuz and curtailed supply from Russia goes well beyond headline ​crude oil and gas pump prices. It's an obvious point, but sometimes needs repeating — fertilisers, chemicals and refining markets are all being ​thrown into a tailspin ⁠too. One key gauge of energy market stress has just entered uncharted waters.

The US diesel crack, a measure of refining profitability, has surged above US$100 a barrel for the first time ever. The so-called "crack spread" is the premium of U.S. diesel futures over WTI crude oil futures. Industries run on diesel. Do producers and manufacturers absorb the hit to margins, reduce output, or pass the soaring cost onto ⁠consumers?

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