Long-term US Treasury rates are now close to 25-year highs. The 30-year yield reached 5.3%, the 10-year reached 4.7% and the latest 30-year Treasury auction cleared at its highest yield since 2001.
Two pressures sit behind the move described in this week’s newsletter: continued concern about inflation and the very large amount of long-term capital expected to be required for AI capacity. The accelerating buildout is creating demand for financing across public bonds, private credit and new vendor-financing structures.
| Market force | Effect |
|---|---|
| AI capacity buildout | Large, long-term capital requirement and more expected borrowing |
| Higher oil prices | Potential additional inflation pressure |
| Fed timing | Uncertainty around the policy response |
| Result | UST 10-year at 4.7% and UST 30-year at 5.3%, both around 25-year highs |
Softer July CPI does not remove the uncertainty
The CPI rate for July was 3.4%, down from 3.5% in June. That 0.1 percentage-point decline could delay rate increases by the Federal Reserve. It has also contributed to concern about a scenario in which inflation begins to pick up again while the Fed is slow to act.
“The all items index rose 3.4 percent for the 12 months ending July after rising 3.5 percent for the 12 months ending June.”US Bureau of Labor Statistics · July 2026 CPI report
Oil is the most immediate swing factor
Brent crude rose $3 over the week to $91 as rhetoric around the Iran war increased. An escalation ahead of the November US midterm elections could materially lift oil prices and add to inflation pressure.
The effect may be temporary. The newsletter’s view is that incentives for both sides could change after the 3 November elections, potentially allowing prices to fall. Until then, developments around the Strait of Hormuz remain an important variable for rates.
Credit demand remains strong
Higher government bond yields have not translated into weak demand for corporate credit. Investment-grade spreads are at 80 basis points and US high-yield spreads are at 267 basis points, both around 25-year lows.
High underlying rates are helping attract capital to fixed income, supporting strong demand even as issuers face a higher base-rate environment. The combination of high government bond yields and tight credit spreads helps explain why primary markets remain active.
What matters this week: Watch rates-market sentiment as traders assess the likely path of future changes, and monitor the Strait of Hormuz for the oil-price implications of further conflict news.
