US Treasuries endured a sharp 2026 sell-off, with the 10-year yield touching 5% in September. A partial rebound in October has eased the pressure, but Fed policy, heavier supply and energy-driven inflation have not normalized the yield curve. Here is what drove the move and what it means for global bonds.
🔑 Key Takeaways
- The 10-year Treasury yield touched 5% on September 14 for the first time since October 2023.
- The Fed raised its policy rate by 25 basis points to a 3.75-4% range, its first hike since 2023.
- US inflation reached 3.7% in September, with gasoline prices jumping 9.1% in the month alone.
- Global yields followed, with UK 30-year gilts at a record 6.04% and Japan’s 30-year near 4.2%.
An energy shock forces the Fed’s hand
The 10-year Treasury yield opened 2026 near 4.15% and slipped below 4% in February, as markets still priced rate cuts after the 2025 easing cycle. That picture changed at the end of February, when the United States and Israel struck Iran. Disruption in the Strait of Hormuz, which carries roughly one-fifth of global trade, pushed Brent from the low $70s to above $100 a barrel by mid-March. The Bloomberg Global Aggregate Bond Index, which had gained as much as 2.1% by February 27, wiped out its gains.
US inflation climbed from 2.4% in February to 3.5% in June and 3.7% in September, driven largely by fuel. Producer prices rose 6.3% year on year in September, their fastest gain since 2022, while core inflation excluding food and energy stayed contained at 2.6%. That split keeps the debate alive between temporary energy effects and the risk of second-round inflation.
On September 16, the Fed raised its policy rate by 25 basis points, unanimously, to a 3.75-4% range. On October 28 it held rates in a 10-2 vote, with Lisa Cook and Beth Hammack preferring another increase. Futures then priced a probability above 80% of a December hike.
Long-end yields at multi-decade highs
The 10-year yield reached 4.5% in May, eased over the summer, then rebounded sharply in September on solid economic data, oil back above $100 and fears of further Fed tightening. The table below summarizes the key levels.
| Benchmark | Level | Reference |
|---|---|---|
| US 10-year Treasury, start of 2026 | about 4.15% | January 2026 |
| US 10-year Treasury, intraday peak | about 5.36% | early October |
| US 10-year auction | 5.30% | highest since 2000 |
| US 30-year Treasury, end of July | 5.28% | highest in thirty years |
| UK 10-year gilt | about 5.38% | highest since 2007 |
| German 10-year Bund | 3.69% | last seen in 2011 |
| Japan 10-year JGB | 3.11% | first move above 3% since 1996 |
On October 22, a tech-led equity slide pulled yields down more than 17 basis points, their largest one-day drop since March 2023. The 10-year finished October near 4.93%.
Supply, term premium and fiscal pressure
Beyond the policy cycle, several structural forces explain higher borrowing costs. The US deficit for the fiscal year ended in September reached $1.992 trillion, up 12% year on year and roughly 6% of GDP. Gross federal debt passed $40 trillion in August, and net interest costs rose $115 billion, or 11%, over the year. Washington now spends more on interest than on Medicare or defense.
- AI infrastructure: according to UBS, technology companies building AI data centers have absorbed nearly all of their operating cash flow, against a ten-year average of around 40%. Barclays expects $2.46 trillion of US corporate bond issuance in 2026, up almost 12% from 2025.
- Term premium: per the Federal Reserve Bank of New York, the 10-year term premium rose about 40 basis points between mid-September and early October to 0.98%, its highest since 2014. It explained more than the entire rise in the 10-year yield.
- Sovereign supply: Germany plans about €525.5 billion of issuance in 2026, the UK £246.2 billion for fiscal 2026-27, and Japan around ¥40 trillion for fiscal 2027, up from ¥32.7 trillion previously.
- Central bank selling: some central banks, including China’s, sold sizable monthly quantities of Treasuries.
The Fed’s balance sheet offset part of that pressure. It restarted balance-sheet expansion in December, and on February 4 the Treasury confirmed it had bought more than $90 billion of short-dated bills over the previous eight weeks. John Luke Tyner of Aptus Capital Advisors argued these purchases bring stability not only to bills but also to longer notes and bonds.
Versus 2022: a shallower drawdown and higher starting yields
The 2026 correction remains smaller than 2022’s. The Bloomberg US Aggregate lost 2.91% through September 30, nearly identical to the roughly 2.9% lost in 1994. October was its best month of the year, gaining 2.44% and trimming the year-to-date loss to 0.54% by October 30. In 2022 the index fell 13.01%, its worst year since the series began in 1976.
| Metric | 2022 | 2026 (to October 30) |
|---|---|---|
| US aggregate index return | -13.01% | -0.54% |
| 10-year yield change | +2.3 points (1.51% to 3.88%) | about +1.2 points |
| Fed policy rate change | +4.25 points | +0.25 point |
| Index yield to worst | below 2% (end 2021) | 5.24% (end October) |
Starting yield is the main cushion. Vanguard estimated the index yield rose about 120 basis points through late September, while total return fell only about 2.5%. Ben Carlson of Ritholtz Wealth Management noted the index’s first negative five-year rolling returns on record and some of the lowest real 10-year yields ever, calling it ‘the most brutal bond market in modern financial history’.
“Rate cuts are not necessary for bonds to work.”
Matt Wrzesniewsky, Head of Fixed Income Client Portfolio Management, Vanguard
For investors, yields are paying income again: about 4% on cash, close to 5% on high-quality bonds, and more on investment-grade corporate credit. The rotation was visible in October, when US government bonds gained 2.4% while the Nasdaq fell 5.3%.
Conclusion: the storm is easing, not over
The bond sell-off looks less violent than in 2022, but normalization is incomplete. Short maturities will keep tracking Fed expectations and inflation prints, while long maturities will depend more on supply, growth and risk premia. A sharp slowdown would likely push yields lower; robust growth combined with sticky inflation would keep them elevated.
Base case: yields hold near current levels, with a gradual steepening if inflation moderates. Bull case: lower energy prices and reduced issuance open the door to a rally. Bear case: another Fed hike and wider deficits push the term premium higher. Bonds are regaining their role as income assets, but their path will hinge on geopolitics and fiscal discipline.
Sources
- Mike Dolan, ROI (Reuters), November 11, 2026
- Landaas & Company, bond market analysis
- International Finance, Insights: bonds bleed in 2026 but this is no 2022
- International Banker, Alexander Jones
Cet article est publié à titre informatif et éducatif. Il ne constitue en aucun cas un conseil en investissement. Faites vos propres recherches (DYOR) avant toute décision.
