The benchmark 10-year Treasury yield climbed to 5.23% on Friday, its highest level since 2007, after hovering just below 4.8% earlier this month. Stubborn inflation is driving expectations of additional tightening from the Federal Reserve, with a 64% probability of a rate hike in October according to the CME FedWatch tool. Year-ahead inflation expectations rose to 4.6% in September, the highest reading since June. Thierry Wizman, global FX and rates strategist at Macquarie Group, argues that the yield surge is primarily driven by heavy bond issuance rather than inflation, as companies borrow heavily to fund artificial intelligence infrastructure. Alphabet, Amazon, Meta, Microsoft and Oracle issued roughly $132 billion in debt through July, with broader AI-related issuance potentially reaching $300 billion to $570 billion this year.
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