Overview
- This week bond markets in developed economies saw a sharp repricing with the U.S. 10-year near 4.8% and 30-year yields above 5%, levels not seen in decades.
- Investors are demanding more pay to hold long-dated debt because large U.S. deficits, reduced foreign and official purchases, and heavy corporate borrowing for AI and data centers have increased long-end supply.
- The Treasury expanded long-end buybacks to about $4 billion per auction for September through November, but those operations have so far only produced short-lived relief for yields.
- Rising Treasury yields have translated into higher consumer costs with mortgage rates near 6.8% and greater refinancing stress and rising default pressures among weaker high-yield corporate issuers.
- The move reflects a lasting shift in market structure where fewer central banks and reserve holders buy Treasuries and the CBO’s projection that the U.S. could hit the $41.1 trillion debt limit between late-winter and mid-summer 2027 adds a downside risk to yields.