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US Treasury yields climbed to their highest levels since 2007 and 2004 respectively as a deepening bond sell-off was fueled by Federal Reserve rate hikes, war-related energy crises, and concerns over ballooning government debt.
Yields on the longer end of the curve rose further to multidecade highs on Monday as a bond sell-off deepened. ), often referred to as the most critical number in global finance for its widespread use as a benchmark rate, advanced roughly 5 basis points to 5.25%, its highest level since 2007, when yields rose in the run-up to the Great Financial Crisis.
) advanced by 6 basis points to 5.57%, a level not touched since 2004. The short end was also under pressure, as the 2-year yield members expected at least another quarter-point hike, reinforcing a higher-for-longer outlook for rates. Four FOMC members saw the need for the Fed to hike rates by 50 basis points in 2026. The FOMC's price stability mandate has pushed the Fed to raise rates, per Warsh's statement.
The war in Iran has made that mandate more consequential as it pushes up energy prices around the globe, increasing strain on businesses and consumers. A surge in spending on data centers, chips, power generation, and other infrastructure has helped keep US investment and economic growth resilient, even as financing costs have climbed.
That strength can push yields higher by reducing the case for lower interest rates, while the enormous capital requirements of the build-out are adding to"competition for capital," or the demand for financing across the economy. Taken together, those forces have driven investors to demand substantially higher yields on US government debt as they digest stronger growth, stickier inflation, expectations for tighter Fed policy, and a swelling supply of Treasurys needed to finance federal deficits.
The result has been a sharp repricing across the curve. US Treasury Secretary Scott Bessent arrives to meet China's Vice Premier He Lifeng at JPMorgan Chase's global corporate headquarters in New York City, on Sept. 20, 2026. Rising yields aren't necessarily bearish for growth, Macquarie global strategists Thierry Wizman and Gareth Berry argue. Rising Treasury yields often represent economic growth — when investors expect stronger activity, firmer demand, and continued wage increases.
"The reason to worry about the recent rise in long-term yields, if there is any, is not because they will slow the economy," the strategists wrote. "That way of thinking inverts the truer causality: yields are high partly because the economy is strong and bond issuance is high. And the economy is strong mainly because of the AI-induced infrastructure investment cycle.
" Problems arise, Wizman and Berry wrote to clients on Monday, when yields rise too quickly, as they largely have since the start of the Iran war in late February. Rapidly rising yields can"fall disproportionately on one company, lender, or whole sector that had over-leveraged in the low-yield environment of 2021," the strategists wrote. Even if that outcome remains contained, concerns can still trigger volatility in the wider market.
Investors will be carefully watching this week's US PCE price-change report — the Fed's preferred measure of inflation — and Friday's September jobs report, both set to be key macro indicators for the FOMC's path forward. Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com
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