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Copper prices slumped to their lowest in more than four months on Wednesday on concerns about global growth after bond yields surged on views that interest rates will have to stay high to dampen inflation.

Three-month copper on the London Metal Exchange (LME) was down 0.3% at $7,985.50 a metric ton in official open-outcry trading after dropping to $7,924.50, its lowest since May 25.

Copper and other metals recovered after the dollar index weakened, making commodities priced in the U.S. currency less expensive for buyers using other currencies.

Copper drifts lower

Earlier, a selloff in world government bond markets pushed U.S. 30-year Treasury yields to 5% for the first time since 2007.

“We’ve got this panic about rising U.S. yields, which is quite a big driver,” said Dan Smith, head of research at Amalgamated Metal Trading.

“There are a lot of reasons to be worried about slowing growth outside of China. I think there’s a lot of complacency about where the U.S. is at the moment.”

Smith said copper had broken a rising trendline, signalling further losses, with prices possibly falling as low as $7,330.

“I think we’re going to have a test of the lower levels across the base metals in the next days and weeks,” he said.

Higher interest rates were also a factor in copper spreads, Malcolm Freeman, director at UK brokerage firm Kingdom Futures, said in a note.

“Nobody wants to finance the cash and carry as the risk is generally deemed too high,” he said.

The discount of LME cash copper to the three-month contract was at $70 a ton, hovering near its 31-year high of $77.50 hit on Tuesday, as on-warrant inventory in LME warehouses of 167,600 tons hit their highest in two years.

LME aluminium fell 0.9% in official activity to $2,270 a metric ton, while nickel gained 0.7% to $18,850, zinc rose 0.9% to $2,523.50, lead added 0.7% to $2,132 and tin climbed 1.6% to $24,225.

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