{"id":17333,"date":"2026-09-02T16:46:56","date_gmt":"2026-09-02T08:46:56","guid":{"rendered":"https:\/\/tingchao.xyz\/?p=17333"},"modified":"2026-09-02T16:47:04","modified_gmt":"2026-09-02T08:47:04","slug":"no-shortage-of-culprits-in-panic-over-long-us-treasury-yields","status":"publish","type":"post","link":"https:\/\/tingchao.xyz\/?p=17333","title":{"rendered":"No shortage of culprits in panic over long US Treasury yields"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

Higher long-end Treasury yields are unlikely to retreat anytime soon, and a host of intertwined supply and demand factors will likely hamstring U.S. policymakers seeking to \u200bcap borrowing costs.<\/p>\n\n\n\n

That is because the renewed surge in rates reflects immediate concerns about the inflation picture in the U.S., alongside longer-term questions centering on how the market will \u200cabsorb a flood of bonds sold by governments and high-quality corporate issuers, as well as a shift in the makeup of buyers to groups more likely to demand higher rates.<\/p>\n\n\n\n

Treasury Secretary Scott Bessent, now deploying all the tools at his disposal to try to pull down those long-term borrowing costs, may find those structural issues offer the biggest challenge of all, bond investors say.<\/p>\n\n\n\n

“Until global governments, including the United States, deliver a credible plan to address the massive and growing deficits, \u200bthe bond market is saying, ‘Sorry, we can’t lend to you, or, if we do, it’s going to cost you a lot more money,'” said Arif Husain, head of global fixed income \u200binvesting for T. Rowe Price.<\/p>\n\n\n\n

Husain believes the change in the makeup of the buyers at such a critical time will make Bessent’s attempts to push longer-term \u2060yields especially challenging.<\/p>\n\n\n\n

“There’s a supply\/demand mismatch in the cash bond market, with fewer price-insensitive buyers willing to take that Treasury supply without being offered higher yields to do so,” he added.<\/p>\n\n\n\n

REPRICING TREASURY RISK<\/strong><\/p>\n\n\n\n

The \u200bbiggest part of the change, bond market participants say, comes in the term premium, or the portion of the yield that reflects investors’ willingness to commit capital for decades.<\/p>\n\n\n\n

No one expects the U.S. to default, \u200bbut the U.S. fiscal picture is deteriorating, with federal government debt topping $40 trillion. A higher term premium and heightened inflation expectations explain part of the backup in rates, market participants say.<\/p>\n\n\n\n

“Bond investors increasingly question the safety of U.S. Treasuries, and they have re-priced Treasuries as a risky claim,” Hanno Lustig, a finance professor at Stanford University and senior fellow at the Stanford Institute for Economic Policy Research, said in an August 20 paper.<\/p>\n\n\n\n

His research documents the rise of hedge funds and other \u200bprice-sensitive firms as supplanting official, longer-term, less-sensitive buyers such as overseas central banks. Those shifts in who acts as the marginal buyer of government bonds have increased the price sensitivity of the market and \u200bfed volatility in long-term Treasury bond prices that can amplify the forces driving up interest rates.<\/p>\n\n\n\n

Another major dynamic is playing out: corporate issuers, led by firms at the center of the AI data center buildout, are borrowing at \u200ca rapid clip: \u2060Wall Street expects big tech firms will spend more than $730 billion on AI infrastructure this year, up from last year’s $400 billion, and a large amount of that will be borrowed. <\/p>\n\n\n\n

Their fundamentals \u2013 strong earnings growth, plenty of free cash flow \u2013 strike many investors as more appealing than the federal government’s.<\/p>\n\n\n\n

As the Treasury market competes for the same pool of long-term capital as investment-grade corporate issuers perceived to have stronger credit fundamentals, investors are voting with their dollars and pushing spreads between the two categories to extremely narrow levels, said Thierry Wizman, global FX and rates strategist at Macquarie.<\/p>\n\n\n\n

“To some extent, investors see (corporate) debt as safer,” said \u200bWizman.<\/p>\n\n\n\n

True, companies \u2013 unlike national governments \u2013 do present a \u200bdefault risk. But that appears to be slim \u2060for the kind of issuers now tapping the long-term debt markets, investors say.<\/p>\n\n\n\n

Corporate profits from companies in the Standard & Poor’s 500 index (.SPX), opens new tab soared 52% in the second quarter, FactSet data show, bringing company profits as a share of GDP to a record 13.2%, according to the Bureau of Economic Analysis.<\/p>\n\n\n\n

WATCHING THE TREASURY \u200bBUYERS<\/strong><\/p>\n\n\n\n

Others believe it\u2019s a mistake to focus solely on the argument that hyperscaler debt issuance is \u201ccrowding out\u201d Treasury bonds and driving yields higher. In \u200btheir view, the demand side, \u2060which has been changing steadily in recent years, is playing an increasingly important role.<\/p>\n\n\n\n

The change in the market’s structure described by Lustig has made Treasury bonds more vulnerable to periodic supply-demand imbalances and, on the margin, to higher yields, said Ryan Swift, U.S. bond strategist at BCA Research.<\/p>\n\n\n\n

“That is not something that has happened in the last few months,” he said. “It has happened in the last couple of decades.”<\/p>\n\n\n\n

The uncertain picture around inflation, \u2060especially given the \u200bimpact on energy prices of the unresolved conflict with Iran, is an aggravating factor, investors agree.<\/p>\n\n\n\n

The one certainty, they add, is \u200bthat the nature of these issues likely will make it tough for Bessent and the Treasury Department to achieve lower long-term rates, as both supply and demand issues are beyond their control.<\/p>\n\n\n\n

“Nobody has the stomach to make any tough choices about bringing the \u200bdebt under control, and inflation is still well above the Fed’s target,” said Mike Goosay, chief investment officer for fixed income at Principal Asset Management.<\/p>\n","protected":false},"excerpt":{"rendered":"

Higher long-end Treasury yields are unlikely to retreat anytime soon, and a host of intertwined supply and demand factors will likely hamstring U.S. policymakers seeking to \u200bcap borrowing costs. That is because the renewed surge in rates reflects immediate concerns about the inflation picture in the U.S., alongside longer-term questions centering on how the market […]<\/p>\n","protected":false},"author":8,"featured_media":17334,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[5],"tags":[3637,1794,4354],"class_list":["post-17333","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international","tag-long","tag-treasury","tag-yields"],"yoast_head":"\nNo shortage of culprits in panic over long US Treasury yields - LISTEN WORLD<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tingchao.xyz\/?p=17333\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"No shortage of culprits in panic over long US Treasury yields - LISTEN WORLD\" \/>\n<meta property=\"og:description\" content=\"Higher long-end Treasury yields are unlikely to retreat anytime soon, and a host of intertwined supply and demand factors will likely hamstring U.S. policymakers seeking to \u200bcap borrowing costs. 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