25.09.2026 - Bond Rout Deepens
The historic sell-off in US Treasuries continues, pushing benchmark yields to levels not seen in decades.
The US 10-year Treasury yield has risen for six consecutive weeks, climbing above 5.20% intraday, its highest level since 2007. At the long end of the curve, the 30-year yield reached 5.50%, a level last seen in 2004.
Pressure is also building at the short end, with the 2-year yield above 4.90%, as markets increasingly price in the risk of further monetary tightening.
At the same time, concerns over rising US debt levels and the growing supply of government bonds are adding further pressure, particularly at the long end of the yield curve.
Markets:
Equities: Tech and AI bet ooutperforming the rest of the market.
Bonds: yields little change after yesterday’s spike - US 2y yield above 4.90%, US 10y yield above 5.19%, Japan 10y yield 3.07%
Commodities: Oil prices falling after yesterday's rally, WTI at USD 93/barrel and Brent around USD 105/barrel;
Precious metals prices almost unchanged, gold USD 4’280/oz, silver USD 64/ozCurrencies: US dollar weakens - Japanese Yen unchanged USDJPY 157
Cryptos: Falling after strong rally - Bitcoin above USD 84k
Volatility: The VIX index remains around 15 (good level for hedging!)
My View: The message from bond markets is becoming increasingly difficult to ignore: the global cost of capital is moving materially higher.
While the bond rout deepens, equity investors appear remarkably relaxed, focusing primarily on the recent decline in oil prices.
But how long can this divergence continue?
The relationship between bonds and equities is becoming increasingly uncomfortable. A 10-year Treasury yield above 5% and a 30-year yield around 5.50% materially raise the discount rate for equities and increase financing costs across the economy. This should matter particularly for long-duration, high-valuation growth stocks, yet these are precisely the areas currently outperforming.
For now, lower oil prices are providing some relief. But the bond market is sending a very different message: inflation risks remain elevated, monetary policy may have to stay tighter, and the cost of capital continues to rise.
In my view, the widening disconnect between bonds and equities cannot continue indefinitely.
Either bond yields need to fall materially, or equity markets will eventually have to adjust to the new reality of higher rates.
With the VIX still around 15, investors continue to price remarkably little risk.
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