U.S. Treasury yields climbed Monday: the 10-year hit 5.25%, its highest since 2007, and the 30-year reached 5.57%, last seen in 2004. Bets on further Fed hikes, energy costs tied to the Iran war, federal deficits and AI investment added pressure.
At its September meeting, the Fed raised its target lending rate by a quarter point, its first hike in three years. Projections indicated most voting Fed officials expected at least one further quarter-point increase; four saw a need for 50 basis points of hikes in 2026. Chair Kevin Warsh said growth had strengthened but inflation remained a problem.
Macquarie strategists Thierry Wizman and Gareth Berry argued that high yields partly reflect strong growth and heavy Treasury issuance. AI infrastructure spending has supported investment and growth while increasing competition for financing. They warned that a rapid rise in yields could strain companies, lenders or sectors that borrowed heavily when rates were low, potentially fueling market volatility. Investors were watching this week's PCE inflation report, the Fed's preferred measure, and the September jobs report for clues to its next steps.
