Has the safe-haven halo failed? The U.S. Treasury selloff is back, and Wall Street has barely breathed a sigh of relief before being jolted awake again.

Just as global bond investors were starting to believe the worst phase of this year's selloff had passed, the surge in U.S. Treasury yields forced them to reconsider that judgment. The multiple factors roiling the world's largest bond market show little sign of fading: stubborn inflation and hawkish Fed rhetoric have traders bracing for more aggressive rate hikes, while growing debt supply further amplifies upward pressure on yields. Even as the turmoil triggered by NVIDIA Corporation (NVDA.US) rattled stocks and risk sentiment, the bond selloff has not stopped, undermining expectations that Treasuries have reclaimed their traditional safe-haven role. "The current environment is trickier than during the COVID pandemic or the global financial crisis," said Kellie Wood, a fund manager at Schroders global in Sydney, who is currently shorting Treasuries. "Those past episodes were one-way moves; now we have successive supply shocks and violent rate swings. Until year-end, we need to be prepared for yields to keep rising." This week, Treasuries were hit hard, with pressure extending beyond the policy-sensitive short end. The combined rise in two-year Treasury yields on Tuesday and Thursday (the spot market was closed Wednesday) was the largest since March 2023, while the rise in 10-year yields was the largest since April 2025. As of Friday Asian trading hours, the two-year yield was 4.86% and the 10-year yield was 5.12%. This marks a sharp reversal from just a week earlier, when Democrats' landslide victory in the U.S. midterm elections, combined with concerns about artificial intelligence (AI), drove investors to flock to Treasuries for safety. That influx of bullish positioning has since been completely reversed, triggered by Fed Governor Christopher Waller's support for a rate hike and his statement that he would favor a 50-basis-point increase if inflation continues to accelerate. A stronger-than-expected consumer price report reinforced the shift, as did comments from Dallas Fed President Lorie Logan. As the pricing anchor for global funding costs, the pressure on Treasuries is now transmitting to global markets. A gauge of Treasury returns has slid again after the latest surge in yields, reversing a recovery that had narrowed this year's loss to 1%. "The selloff in developed-market sovereign debt is far from over," said Tracy Chen, a portfolio manager at Brandywine Global Investment Management, noting that the main drivers remain strong. "The next target level for the 10-year yield should point to 5.5%, after which there may be another period of consolidation." In the view of strategist Alyce Andres, "there is room for the two-year Treasury selloff to continue when a new round of inflation data is released on Friday." However, for some investors, rising yields are creating opportunities. George Boubouras of hedge fund K2 Asset Management sees 10-year Treasuries as attractive near 5.3% and says the recent rebound is not a false start. "We will buy at 5.3% and keep buying until it jumps to a new level," said Melbourne-based Boubouras, who is the firm's managing director and head of research, investments and advisory. Rate pricing expectations Outside the U.S., yields in Japan and Australia are climbing back to multi-year highs. French yields have surged sharply on concerns about the country's fiscal outlook and political instability, resuming their rise after falling earlier in November. Traders are increasing bets on global policy tightening. According to compiled data, swap markets currently price an average policy rate change of more than 50 basis points across eight economies over the next year, up from 33 basis points on Nov. 6, which was the lowest level since June. "Unless there is a severe crash in risk assets such as stocks, or oil prices fall back to pre-war levels, central banks will likely raise rates by more than current market expectations," Steven Barrow, head of G10 strategy at Standard Chartered in London, wrote in a report. Wood at Schroders global sees a more divergent picture. While U.S. rates may need to rise possibly above 5% as inflation accelerates and growth outpaces the rest of the world, she is long bonds in Australia and Europe, betting that local central banks will ease policy in 2027 to avoid recession. "2027 will be a year of divergence, with economies at different stages of the cycle," she said. "For active bond managers, 2027 has a lot to offer."