The US Treasury market has faced sustained selling pressure recently, pushing long-term yields steadily higher. After the 30-year Treasury yield climbed to its highest level in nearly two decades, investors now anticipate the 10-year yield could also breach a critical threshold.
A recent survey of 392 market participants reveals that approximately two-thirds of respondents expect the 10-year Treasury yield to surpass 5% before the end of this year. Among them, 38% project the yield will break through 5% in the fourth quarter, while another 28% believe this level could be reached as early as August or September. Meanwhile, the proportion of respondents expecting the 10-year yield to continue rising over the next month has reached its highest level in nearly four years, reflecting significantly heightened market concerns about rising long-term US financing costs.
In early New York trading on Wednesday, the 10-year Treasury yield stood at approximately 4.65%, retreating from the 4.75% high touched earlier this week. This pullback followed the Treasury Department's unexpected announcement that it would expand its long-dated debt buyback program, which triggered a rebound in longer-maturity bonds. The Treasury stated it would at least double the scale of buybacks for securities with maturities ranging from 10 to 30 years. Market participants widely interpret this move as a direct response to the rapid ascent in long-term yields in recent weeks.
Over the past 19 years, the 10-year Treasury yield has only briefly exceeded 5%, with the most recent instance occurring in October 2023, when the S&P 500 was undergoing a correction. Currently, the 30-year Treasury yield remains steady at approximately 5.20%. However, the survey indicates that nearly 60% of respondents do not expect the 30-year yield to climb to 6% this year.
Investor anxiety over further yield increases stems from a confluence of pressures. Geopolitical conflicts in the Middle East have driven up energy costs, making US inflation more stubbornly persistent. Uncertainty surrounding the Federal Reserve's monetary policy trajectory persists, while the US federal debt burden is approaching the $40 trillion mark, drawing increasing attention to fiscal sustainability issues.
The artificial intelligence investment boom is also emerging as a new source of pressure on the Treasury market. As major technology companies issue substantial amounts of debt to finance AI data centers and computing infrastructure, competition between corporate bonds and US Treasuries for investor capital has intensified markedly. Investment-grade corporate bond issuance in the US has already approached $1.5 trillion this year, representing a 36% increase year-over-year. Nomura estimates that the approximately $200 billion in borrowing by large tech companies alone this year equates to roughly 25% of the net medium- and long-term Treasury issuance directed toward private investors—a proportion approximately five times higher than in 2025.
Survey participants also expressed notable concerns about the interplay between AI giants' financing activities and the Treasury market. Some investors worry that sustained corporate bond issuance from large tech firms will divert capital that would otherwise flow into US Treasuries. Others fear that rising Treasury yields will push up borrowing costs for technology companies. These dynamics could potentially create a self-reinforcing feedback loop.
Fiscal concerns represent the market's most fundamental long-term worry. More than three-fifths of respondents believe that even significant shifts in US economic growth or inflation would struggle to meaningfully reduce the government debt-to-GDP ratio, and they expect the nation's fiscal position to continue deteriorating until it eventually triggers more severe consequences. Ruben Hovhannisyan, fixed income portfolio manager at TCW Group, noted that given the difficulty of achieving meaningful fiscal improvement and elevated bond market volatility, he remains bearish on the long end of the yield curve and therefore prefers holding short-term Treasuries over long-term bonds.
Market participants remain cautious about whether the Treasury's expanded buyback program can reverse the selling trend in long-dated bonds. Macro strategist Cameron Crise believes the move clearly signals that the Treasury is monitoring and concerned about rising long-end yields, but increasing buyback scale alone will not be sufficient to reverse the long-bond selloff. Nevertheless, this policy signal could prompt some short sellers to cover their positions.
Despite the significant rise in Treasury yields, the US dollar has remained broadly flat this year. Most survey participants believe there is no simple yield threshold that, once breached, would inevitably trigger a dollar decline. The currency's trajectory depends more on the speed of the bond selloff and changes in real yields.
Notably, over 60% of respondents indicated that the US government's previous willingness to assist Japan in stabilizing the yen has actually made them more worried about the Treasury market. Japan remains the largest foreign holder of US Treasuries, and any shift in major overseas buyers' appetite for US debt could further impact the supply-demand dynamics of long-term Treasuries.
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