Three things that could drive it even higher
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The yield on the 30-year U.S. Treasury has surged to its highest level in nearly two decades, and some strategists see scope for the selloff in long-dated government bonds to go further.
The 30-year Treasury yield, which is typically sensitive to geopolitical events, advanced more than 4 basis points to 5.311% on Monday, reaching its highest level since June 2007. Foreign holdings of Treasurys fell in June, the Treasury Department reported on Monday, with top holders U.K., China and Japan all reducing their holdings.
“Long-term yields look likely to push up to 5.60%-5.70% and likely move up at a quicker pace than normal given the recent resolution of this three-year triangle pattern,” said Fundstrat technical strategist Mark Newton.
That comes despite recent U.S. economic data that might normally be expected to push yields lower. July retail sales were the weakest since May 2025, while recent labor-market data has also pointed toward cooling conditions.
So what could send yields even higher?
1. Global participation
The latest jump in Treasury yields did not originate entirely in the U.S.
Fundstrat’s Newton pointed to Japan, where weaker-than-expected economic growth was accompanied by a hotter GDP deflator.
“Ten-year and twenty-year JGB yields pushed higher, and it spilled right over into U.S. markets, driving the long bond to new multi-year highs,” Newton said.
If yields in other major developed markets continue climbing, investors may demand higher returns to hold U.S. government debt as well, said industry veterans.
BMO strategists also flagged fiscal concerns across the U.S., Japan, U.K. and Europe as one possible factor behind recent weakness in long-dated bonds. Even if U.S. economic data softens, a global repricing of long-term borrowing costs could keep upward pressure on Treasury yields, they said.
2. More Fed hikes
Another risk is that the U.S. economy simply remains too strong for interest rates to fall much.
Markets are currently pricing an unusually benign combination: resilient growth and record-high equities, Deutsche Bank said in a note late Monday, only limited by additional central-bank tightening, and contained commodity supply shocks. The bank argued that combination may prove difficult to sustain.
“By definition, strong growth and buoyant risk assets mean that financial conditions will remain accommodative, raising demand and pushing central banks into faster rate hikes,” Deutsche Bank macro strategist Henry Allen wrote.
If growth stays robust and financial conditions remain loose, demand could stay strong enough to keep inflation elevated and force the Federal Reserve to raise rates more than investors currently expect.
Deutsche Bank noted that inflation remains above target and that, historically, current inflation levels have been associated with multiple rate hikes. Its analysis suggests a CPI rate above 3% has historically corresponded with more than 100 basis points…
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