Yields on long-term US government bonds soared dramatically Tuesday, triggering alarm among equity investors as a broad-based Treasury sell-off gripped markets. The benchmark 30-year Treasury yield surged to approximately 5.02% at settlement—its highest level since May 23rd—driven primarily by shifting inflation expectations following fresh economic data.

June's Consumer Price Index (CPI) revealed mounting inflationary pressures, climbing 0.3% month-over-month for its largest single-month gain this year. Year-over-year inflation accelerated to 2.7% from May's 2.4%, while core CPI rose to 2.9% from 2.8%. Notably, prices for tariff-sensitive goods—including furniture, toys, and household appliances—increased at an accelerated pace, signaling that import duties are beginning to permeate consumer inflation metrics.

The breach of the psychologically significant 5% level for long-term bond yields typically foreshadows rising borrowing costs across the economy, affecting everything from mortgage rates to corporate bond issuances. Market participants widely regard the 30-year yield as a crucial barometer of macroeconomic and fiscal health. This sharp ascent reflects mounting bond market concerns about resurgent inflation and intensifying expectations that the Federal Reserve may prolong its elevated interest rate policy.

While federal funds futures traders still price in two potential 25-basis-point rate cuts before year-end, the bond market's violent repricing challenges this outlook. Lauren Henderson, economist at Stifel Nicolaus in Chicago, observed: "Markets now anticipate the Fed maintaining higher rates for longer. The window for rate cuts in 2025 is gradually closing." She further cautioned that impending tariffs scheduled for August 1st could exacerbate inflationary pressures.

Tuesday's turmoil extended beyond long-dated bonds, with the 20-year yield also exceeding 5% and the 3-month Treasury bill rate climbing to 4.345%. Equity markets largely retreated under the weight of rising yields: the Dow shed 0.98%, the S&P 500 declined 0.40%, and the small-cap Russell 2000 plummeted 1.99%. Only mega-cap technology stocks demonstrated relative resilience, nudging the Nasdaq Composite up 0.18%.