U.S. treasury bonds typically occupy a special place in an investor’s portfolio — the asset class against which all other market risk is measured.
But a surge in long-dated yields is forcing investors to rethink this assumption
The yield on the 10-year treasury recently surged to a level it had not seen in over a year, while the 30-year treasury yield this week hit a level it has not seen since 2007 — right before the financial crisis. The moves are being driven by geopolitical conflict and an oil price shock that have rekindled inflation and resulted in a growing consensus that the Federal Reserve will not lower rates at the next meeting, the first since new Fed Chairman Kevin Warsh was confirmed with a mandate from President Trump to bring rates down. In fact, traders are now betting there will be no interest rate cut over the remainder of 2026, and that a rate hike is becoming more likely.
Warsh was being sworn in by Trump on Friday. The shift in bond market assumptions is a wake-up call for investors in an asset class that has long been called a “safe haven” due to bonds’ predictable income and guarantee of the return against maturity. HSBC wrote in a note this week that U.S. treasuries are now in a “danger zone.” On Friday, the 10-year U.S. treasury yield was at 4.57% while the 30-year treasury bond was up to 5.08%.