A sell-off in US government debt spread to Asia on Thursday, with yields on Japan’s benchmark government bonds hitting their highest level in three decades. Japan’s 10-year government bond yield rose 0.1 percentage points to 3.08 per cent, the highest level since 1996, while five-year yields also rose 0.1 percentage points to 2.37 per cent. Bond yields rise as prices fall.

The moves come after US Treasuries suffered their worst single-day sell-off since Donald Trump’s “liberation day” tariff announcements in April last year, as strong economic data and oil price gains prompted investors to reassess the probability of further interest rate rises by the Federal Reserve. The 10-year Treasury yield jumped 0.15 percentage points to 5.11 per cent on Wednesday and rose to as high as 5.13 per cent on Thursday morning in Asian trading.

European government bonds steadied on Thursday after selling off sharply on Wednesday. The 10-year Bund yield in Germany was flat at 3.55 per cent on Thursday, holding on to its 0.1 percentage point rise from the day before. Yields on UK gilts of the same maturity slipped 0.01 percentage points to 5.34 per cent after rising 0.11 percentage points on Wednesday. French government bonds hit their highest additional borrowing costs over German bonds since 2012, during the Eurozone crises.

The sell-off was deepened by rising oil prices. The global benchmark Brent crude was up 0.2 per cent on Thursday morning at $103.25 a barrel, after jumping almost 4 per cent on Wednesday. Derivatives traders are now pricing an almost 70 per cent chance that the Fed will raise interest rates at its next meeting in October, up from about 50 per cent at the start of Wednesday.