Traders work on the floor of the New York Stock Exchange. <\/p>\n
NYSE<\/p>\n
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.<\/p>\n
The 30-year Treasury<\/a> 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.\u00a0Foreign holdings of Treasurys fell in June, the Treasury Department reported<\/a> on Monday, with top holders U.K., China and Japan all reducing their holdings.<\/p>\n “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.<\/p>\n 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.<\/p>\n So what could send yields even higher?<\/p>\n 1. Global participation<\/p>\n The latest jump in Treasury yields did not originate entirely in the U.S.<\/p>\n Fundstrat’s Newton pointed to Japan, where weaker-than-expected economic growth was accompanied by a hotter GDP deflator.<\/p>\n “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.\u00a0<\/p>\n 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.<\/p>\n 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.<\/p>\n 2. More Fed hikes<\/p>\n Another risk is that the U.S. economy simply remains too strong for interest rates to fall much.<\/p>\n 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.<\/p>\n “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.\u00a0<\/p>\n 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.<\/p>\n 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 of tightening during the first year of Fed hiking cycles.<\/p>\n There is precedent for a sharp bond-market repricing even without a recession. In early 2024, stronger growth and inflation pushed the 10-year Treasury yield from 3.88% at the end of 2023 to a peak of 4.70% by late April as expectations for rapid Fed cuts were unwound.<\/p>\n