Investors may understandably be worried about higher rates.
However, yields may be rising for good reasons, too.
Yields at this level -- or higher -- are the norm.
Suddenly, the bond market is getting more attention than the stock market, as rising global bond yields are causing widespread concern -- even panic -- among financial ministers and central bankers, Wall Street financiers, and ordinary investors.
That's because government bond yields of almost every major economy have soared in 2026. That includes the U.S., the United Kingdom, France, Germany, and Japan. The only exception is China, where yields on sovereign bonds have drifted lower this year.
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And the yield on what is perhaps the world's most important asset, the 10-year U.S. Treasury note, rose above 5% in recent weeks and now sits just below that threshold, more than 1 percentage point higher than where it was in February and the highest it's been since 2007. The 30-year Treasury bond yield recently touched a 19-year high.
That's problematic, because most borrowing rates are tied to these yields, from car and home loans to credit cards and corporate borrowing. And higher yields make bonds more attractive relative to risk assets like stocks, drawing capital from equity markets and pushing stocks lower.
The rise in global yields was a major topic of discussion at the Federal Reserve's monetary policy conference in Jackson Hole, Wyoming, last month, as central bankers from across the planet tried to figure out what is driving yields higher so broadly and so rapidly.
And these officials, among them some of the world's most sophisticated financial and economic minds, admitted they don't really know the underlying cause. I think Federal Reserve Chair Kevin Warsh summed it up nicely, using a term I learned long ago in grad school: It's overdetermined.
That is, there are multiple causes for spiking yields, any one of which would be sufficient to send them to current levels. Those causes include soaring government debt levels, persistently high inflation, and competition for capital from AI hyperscalers that are issuing massive amounts of bonds to fund data centers, among others.
But I don't think investors need to panic, at least not yet, for a couple of reasons. First, the stock market -- so far at least -- seems to be taking rising bond yields in stride. The S&P 500 (SNPINDEX: ^GSPC) is up about 12% year to date. And while it has essentially been trading sideways since early August, it hasn't turned down due to rising yields. And keep in mind that September is historically a weak month for the stock market.
Second, rising yields may just reflect a very healthy economy. Economist and market analyst Ed Yardeni says rising yields are a "vote of confidence in the economy" and are the result of strong economic growth. Essentially, robust economic activity raises overall demand for capital as companies invest and consumers spend, so those with capital (in this case, bond investors) demand higher yields on their investments. Clearly, the AI infrastructure build-out is a huge part of that dynamic.
Finally, a little history of yields can be very reassuring at a time like this. Yes, yields are rising somewhat rapidly this year. But in fact, yields at current levels are, historically, the norm, not the anomaly.
Until the great financial crisis of 2007-2009, 10-year Treasury yields routinely hovered around 5%, or even higher. They then fell to a lower level for more than a decade. As Ken Rogoff, former chief economist of the International Monetary Fund and something of an economic historian, told the crowd at Jackson Hole, yields might just be normalizing this year after remaining abnormally low for almost two decades.
As Warsh suggested, I believe multiple factors have driven yields higher this year. And while the bond market -- always -- bears watching, right now it's nothing to be overly alarmed about.
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