London, 1 October 2026 — EBM Newsdesk Analysis — By Nick Staunton
On Wednesday, 30 September, the yield on the 10-year US Treasury rose as high as 5.306% during the session. That is its highest level since May 2002, above even the 2007 peak just before the financial crisis. The 30-year yield climbed to 5.652% and the two-year to 4.899%. The 10-year yield rose more than half a percentage point in September alone, making it one of the worst months for government bonds in years. The most worrying detail is what failed to stop it: Treasury Secretary Scott Bessent stepped up the Treasury’s bond buybacks, and the selling carried on anyway.
This is not just an American problem. The 10-year Treasury yield sets the floor for borrowing costs worldwide. German and French 10-year yields have hit their highest levels in roughly 17 and 18 years, and Japan’s has reached levels last seen in the 1990s. Every rise feeds into European mortgages, corporate loans and government budgets. For countries already under pressure, such as France, which Vanguard now calls a degrading credit, the timing could hardly be worse.
Why Yields Keep Climbing
The sell-off has several causes, and they reinforce each other. The first is inflation. Energy prices have surged since the Iran war began in February, and investors want more yield to compensate for the risk that inflation erodes their returns. The Fed is expected to raise rates again, and Europe faces the same pressure.
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SubscribeThe second is supply. Governments are borrowing more, and they are competing with corporate borrowers for the same money. AI companies are raising vast sums to build data centres. SpaceX went back to the bond market for $20bn days after listing. One fund manager put it plainly: there are simply too many long-term bonds and not enough long-term buyers.
The third is a loss of trust. Central banks have been quietly reducing their holdings of US debt for months. When the traditional buyers step back, prices have further to fall.
The Vicious Loop
What turned a steady rise into a rout this week was forced selling. Hedge funds and property investment trusts have been dumping bonds to cover losses, and leveraged funds have had to rebalance. Analysts also point to the unwinding of the yen carry trade, in which investors borrowed cheaply in yen to buy higher-yielding assets elsewhere. As Japanese yields rise, that trade unravels.
Each forced sale pushes prices lower, which triggers more forced sales. Bargain hunters have not stepped in, because nobody wants to catch a falling knife. That is why the Treasury’s buybacks have failed to steady the market.
Stocks have mostly ignored it so far. That may not last. Higher yields make bonds more attractive compared with shares and raise the cost of debt for every company. More than half of 173 investors in a recent Bloomberg survey expect the US 30-year yield to hit 6% by the end of the year.
What It Means for Europe
Europe imports this pain. Higher US yields pull money across the Atlantic, weaken the euro and push up European borrowing costs even though the eurozone economy is weaker. The brief relief rally on falling oil prices this week did little to change the picture. As long as there is no peace deal, energy prices and bond yields stay hostage to the Gulf.
My Read
The most important number this week is not 5.3%. It is the fact that the US Treasury tried to calm the market and failed. When the world’s most important borrower cannot steady its own debt, the problem is no longer technical. It is about confidence. Europe has spent years assuming cheap money would come back. It won’t. Governments that haven’t fixed their finances, starting with Paris, are about to find out what borrowing at 2000s prices really costs.
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