Bond yields push higher as investors digest global risks, higher-for-longer path for the Fed

Yields on the longer end of the curve rose further to multidecade highs on Monday as a bond sell-off deepened.

The 10-year Treasury yield ( ^TNX ), often referred to as the most critical number in global finance for its widespread use as a benchmark rate, advanced roughly 5 basis points to 5.25%, its highest level since 2007, when yields rose in the run-up to the Great Financial Crisis.

Further out on the curve, 30-year Treasury yields ( ^TYX ) advanced by 6 basis points to 5.57%, a level not touched since 2004. The short end was also under pressure, as the 2-year yield ( 2YY=F ) rose by roughly 8 basis points to 4.93%.

Bets on further rate hikes by the Federal Reserve, an energy crisis kicked off by the war in Iran, ballooning US government debt and budget deficits, and a historic investment cycle driven by the AI build-out have all contributed to a sell-off that has spooked investors.

Of those concerns, the Federal Reserve is perhaps the biggest focus for investors. Earlier in September, the Fed issued a quarter-point rate hike, raising the US target lending rate for the first time in three years.

"We now have data broadly defined that says the economy has indeed strengthened," Fed Chairman Kevin Warsh said in a press conference following the meeting. "Underlying growth is higher. Inflation is the problem. Stable prices have been the problem for now more than five and a half years."

More notable than the hike itself, however, were projections indicating that a majority of voting Federal Open Market Committee (FOMC) members expected at least another quarter-point hike, reinforcing a higher-for-longer outlook for rates. Four FOMC members saw the need for the Fed to hike rates by 50 basis points in 2026.

The FOMC's price stability mandate has pushed the Fed to raise rates, per Warsh's statement. The war in Iran has made that mandate more consequential as it pushes up energy prices around the globe, increasing strain on businesses and consumers.

The AI boom has added another source of upward pressure.

A surge in spending on data centers, chips, power generation, and other infrastructure has helped keep US investment and economic growth resilient, even as financing costs have climbed. That strength can push yields higher by reducing the case for lower interest rates, while the enormous capital requirements of the build-out are adding to "competition for capital," or the demand for financing across the economy.