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The yield on the 30-year U.S. Treasury has surged to its highest level in nearly two decades, and some strategists see scope for the selloff in long-dated government bonds to go further.
The 30-year Treasury yield, which is typically sensitive to geopolitical events, advanced more than 4 basis points to 5.311% on Monday, reaching its highest level since June 2007. Foreign holdings of Treasurys fell in June, the Treasury Department reported on Monday, with top holders U.K., China and Japan all reducing their holdings.
“Long-term yields look likely to push up to 5.60%-5.70% and likely move up at a quicker pace than normal given the recent resolution of this three-year triangle pattern,” said Fundstrat technical strategist Mark Newton.
That comes despite recent U.S. economic data that might normally be expected to push yields lower. July retail sales were the weakest since May 2025, while recent labor-market data has also pointed toward cooling conditions.
So what could send yields even higher?
1. Global participation
The latest jump in Treasury yields did not originate entirely in the U.S.
Fundstrat’s Newton pointed to Japan, where weaker-than-expected economic growth was accompanied by a hotter GDP deflator.
“Ten-year and twenty-year JGB yields pushed higher, and it spilled right over into U.S. markets, driving the long bond to new multi-year highs,” Newton said.
If yields in other major developed markets continue climbing, investors may demand higher returns to hold U.S. government debt as well, said industry veterans.
BMO strategists also flagged fiscal concerns across the U.S., Japan, U.K. and Europe as one possible factor behind recent weakness in long-dated bonds. Even if U.S. economic data softens, a global repricing of long-term borrowing costs could keep upward pressure on Treasury yields, they said.
2. More Fed hikes
Another risk is that the U.S. economy simply remains too strong for interest rates to fall much.
Markets are currently pricing an unusually benign combination: resilient growth and record-high equities, Deutsche Bank said in a note late Monday, only limited by additional central-bank tightening, and contained commodity supply shocks. The bank argued that combination may prove difficult to sustain.
“By definition, strong growth and buoyant risk assets mean that financial conditions will remain accommodative, raising demand and pushing central banks into faster rate hikes,” Deutsche Bank macro strategist Henry Allen wrote.
If growth stays robust and financial conditions remain loose, demand could stay strong enough to keep inflation elevated and force the Federal Reserve to raise rates more than investors currently expect.
Deutsche Bank noted that inflation remains above target and that, historically, current inflation levels have been associated with multiple rate hikes. Its analysis suggests a CPI rate above 3% has historically corresponded with more than 100 basis points of tightening during the first year of Fed hiking cycles.
There is precedent for a sharp bond-market repricing even without a recession. In early 2024, stronger growth and inflation pushed the 10-year Treasury yield from 3.88% at the end of 2023 to a peak of 4.70% by late April as expectations for rapid Fed cuts were unwound.
3. Supply, inflation and the term premium
The third risk is specific to longer-dated bonds: investors may demand greater compensation to lend to the U.S. government for decades.
Heavy Treasury issuance is one pressure point. BMO noted that the latest 30-year auction cleared at its highest yield since 2001, while five of the previous seven 20-year auctions had tailed, suggesting demand for long-duration debt has been less than robust.
Inflation could add another layer of pressure. BMO said energy remains a potential bearish trigger for Treasurys, particularly because yields have shown little willingness to fall despite softer economic data.
A renewed commodity shock would make the picture even harder. Deutsche Bank warned that “the combination of a negative hit to both growth and inflation could hit equities and bonds simultaneously.”
For now, that leaves long-dated Treasurys vulnerable from several directions at once: rising global yields, an economy that could prove stronger than expected, and persistent concerns around inflation and debt supply.
As Deutsche Bank put it, “current market pricing is leaving almost no margin for error.”
