Treasury yields edged higher on Tuesday, extending a global bond sell-off and threatening to raise borrowing costs for millions of Americans.
The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.78%, up from 4.75% late Monday and the highest level since January 2025. The yield on the 2-year Treasury, which closely tracks expectations for the Federal Reserve’s interest rate decisions, rose to 4.37%, up from 4.34% late Monday. The 30-year Treasury hovered around 5.25% on Tuesday.
The global rout pushed a key Bloomberg gauge of bond yields to 3.72%, its highest level since June 2008. The sell-off is being driven partly by persistently higher inflation and concerns about government debt, prompting investors to demand higher yields as compensation for the added risk.
“Fiscal concerns, rising energy prices and AI-related investment have lifted long-term government bond yields across major economies to multi-decade highs,” James Reilly, a senior markets economist at Capital Economics, said in a research note Tuesday.
Here’s what to know about the sell-off and what it means for you.
Why are bond yields rising?
Yields are rising as investors, spooked by inflation and rising government debt, dump their government bonds. Bond yields and prices move in opposite directions, with rising yields signaling that investors are demanding higher returns as investments grow increasingly risky.
Investors are also worried about rising energy prices as the U.S. and Iran continue to clash. The U.S. launched its military action against Iran in a month this weekend, causing oil prices to spike. Renewed tensions raised concerns that the war, now in its seventh month, could further fuel inflation and push up borrowing costs.
“The spike in borrowing costs comes as the latest flare-up in the U.S.-Iran war has raised concerns that central banks will hike interest rates to combat inflation from higher energy costs,” Morningstar, an investment research company, said in a post on Tuesday.
Stubborn price pressures have been a concern for the Federal Reserve, which has sought to bring inflation down to its goal of a 2% annual pace. Last week, while speaking at the central bank’s annual conference in Wyoming, Federal Reserve Chairman Kevin Warsh said the Fed will have “work to do” if inflation doesn’t subside, suggesting that the Fed could be prepared to raise interest rates when it meets next from Sept. 15 to 16.
Interest rate traders now believe there’s a 66% likelihood that the Fed will raise rates in September, according to CME Group’s FedWatch tool.
What does the bond sell-off mean for you?
Movements in the U.S. bond market influence what everyday Americans pay for loans and how much interest they earn on their savings accounts.
Higher government yields can deliver a blow to borrowers by pushing up costs for everything from auto loans to mortgages. The average 30-year mortgage rate, for example, tends to track the 10-year Treasury, meaning rising yields can push up home borrowing costs.
Elevated borrowing costs also tend to weigh on stock prices, gold and cryptocurrencies, while making it more difficult for businesses to expand.
While higher yields hurt borrowers, they can help increase earnings for savers with high-yield savings accounts and CDs.
Where could yields go from here?
Yields could ease, but it’s not likely in the near term, according to analysts.
“Unlike past bond sell-offs, which had an obvious and often fixable cause, this one is unlikely to suddenly shift into reverse anytime soon,” Reilly said in Capital Economics’ note on Tuesday.
Ulrike Hoffmann-Burchardi, the chief investment officer of the Americas and global head of equities for UBS Global Wealth Management, said in an email Tuesday that she expects yield volatility to persist in the near future before settling at the end of the year. She projects 30-year and 10-year Treasury yields to end the year at 5% and 4.5%, respectively.
