MORNING BID EUROPE-When Treasuries catch Korea's volatility bug, take cover

A look at the day ahead in European and global markets from Stella Qiu Treasuries are ​meant to be markets' quiet backwater. When they start dominating ​headlines and trading like a retail-driven Korean stock market, ‌something ​has clearly gone awry.

In just two sessions, the benchmark US 10-year yield ripped through the 5% barrier and kept going, hitting a fresh 19-year high of 5.2251% overnight. That is a rise of ‌nearly 20 basis points in two days, the kind of move last seen when Trump's Liberation Day tariffs sent markets into a tailspin. This time, no such trigger is apparent.

The long bond went further still. Thirty-year yields jumped 16 bps to 5.5016%, the highest since 2004. Remember ‌when Treasury Secretary Bessent stepped in with more buybacks to defend the 5.3% level? That was only a month ago, and yields ‌are at 5.48%. The latest buyback overnight was a damp squib, managing just $4 billion of the $6 billion scheduled. When risk free money costs more than 5% in the world's largest economy, every asset class faces a reckoning. Governments face steeper borrowing costs to finance their swelling deficits, AI giants must justify their ever large spending plans households confront higher ⁠mortgage costs, raising ​the price of buying a ⁠home.

The sell-off has spilled into Asia. Japan's government yields surged to levels not seen since 1996 and Australia's 10-year yields are on the cusp of hitting a new ⁠15-year high. Higher yields will tighten U.S. financial conditions over time, but futures are still pricing in a 70% chance of a follow up rate hike from ​the Federal Reserve next month. As much as 90 bps of tightening is priced for this cycle.

Even Scandinavian central banks ⁠got the message. Norway's Norges Bank surprised with a rate hike and Sweden's Riksbank signalled it was likely to follow suit by the year end. Will higher rates kill the ⁠stock ​market bull run? Not if AI fever has a vote. Tech investors remain largely unfazed, with Nasdaq futures holding steady. Most Asian markets were shut on Friday, but Japan's Nikkei rose 1.2%.

European shares are set for a higher open, with pan-region stock futures up 0.6%, ⁠helped along by oil slipping 1%. But Brent is still at $105 a barrel, the Middle East war is no closer to resolution, and ⁠Trump is too busy entertaining Chinese ⁠President Xi Jinping to read the papers on 7% mortgage rates. Then again, he doesn't have one, so the pain is someone else's.

Key developments that could influence markets on Friday: -- US durable goods order ‌for August

-- NY Fed ‌President John William, BoE Governor Andrew Bailey speak at a conference in ​the UK. (Editing by Shri Navaratnam)