Long-dated US borrowing costs surged to their highest level in over two decades on Thursday, September 24, 2026, as the ongoing selloff in bond markets intensified. The yield on the 30-year US Treasury bond increased by more than 3 basis points, reaching 5.444%, a level not seen since 2004, indicating a fall in bond prices.
US and global bond yields had already experienced a significant jump on Wednesday following the release of stronger-than-expected US business activity data. This data suggested that the US economy was running hot, leading investors to anticipate further Federal Reserve interest rate hikes to combat inflation. Specifically, a report from S&P Global indicated that US business output accelerated at its fastest pace in five years, while firms' input costs, particularly for fuel and transport, jumped at the steepest rate in four years. This fueled concerns that the US economy was overheating and inflation was getting out of control.
The 10-year US Treasury yield also rose significantly, reaching 5.12% yesterday, its highest level since 2007. This increase in yields translates directly into higher borrowing costs for consumers, notably affecting the mortgage market. The rise in bond yields has persisted despite recent interventions by Treasury Secretary Scott Bessent, who has attempted to keep yields low by buying back longer-dated Treasuries. However, his efforts have, at times, had the opposite effect, with bond yields rising after initial buybacks.
Several factors are contributing to the surge in bond yields, including rising expectations of Fed rate hikes, higher growth expectations, and an increase in oil prices. Oil prices climbed about 3% to a one-week high, reigniting inflation concerns. Analysts attribute the sharp rise in rates to these factors, alongside fiscal concerns and investor positioning. Federal Reserve Bank of New York President John Williams also stated on Thursday that another rate hike might be appropriate by year-end to curb inflation. Meanwhile, Treasury auctions for 7-year and 5-year notes saw mediocre and weak demand, respectively.
The global bond sell-off is impacting sovereign debt markets worldwide. For example, Japan's 10-year bond yield reached its highest level since 1996, and Germany's 10-year bund saw its highest yield since 2009. The rising yields are also putting pressure on stock markets, with the S&P 500 down by 0.5%, Nasdaq Composite declining 0.7%, and the Dow tumbling almost 300 points, as investors worry that higher borrowing costs could divert funds from stocks to bonds.
