U.S. Treasury yields are likely to slow after surging to multi-decade highs that alarmed bond traders and weighed on consumers’ borrowing power, said David Zervos, a Wall Street veteran who recently joined the Treasury Department.
“These real yields are really, really high by historical standards, so I think there’s room for them to come down in the future,” Zervos, an adviser to Treasury Secretary Scott Bessent, said Thursday on CNBC’s “Power Lunch.”
Mr. Zerbos’s comments: 10 years and 30 years US Treasury yields have risen to 24-year highs in recent days. Yields in global bond markets have fallen sharply as expectations rise that central banks will raise interest rates and companies continue to borrow money to build artificial intelligence infrastructure.
10 years US Treasury, 1 month
Borrowing costs rose along with Treasury yields, reducing demand for popular consumer loans such as mortgages.
Zervos said that while the Federal Reserve and other central banks have been responsive to short-term interest rate hikes, long-term expectations for interest rates and inflation have not changed much.
Last month, the Federal Reserve raised interest rates for the first time in three years. Central bank officials this week suggested further rate hikes could occur before the end of the year.
Federal funds futures traders expect there is a more than 82% chance that the Fed will next raise borrowing costs at its December meeting, according to CME’s FedWatch tool.
Zervos said part of the pressure on global real interest rates is also coming from increased corporate spending on AI. He called the technology “SI,” an abbreviation for “superintelligence.” The term has been promoted by President Donald Trump amid growing local opposition to data centers.
But Zervos, an alumnus of Jefferies and the Fed, characterized these investments as a positive sign for the overall economy and said the resulting impact on yields is a short-term problem.
He said bond yields are likely to fall after the energy shock caused by the US-Iran war is resolved. price of brentcrude oil prices, the global oil benchmark, rose about 38% from the start of the conflict to Wednesday.
“We will only have to endure this situation for a short period of time,” Zervos said.
Brent crude oil in 2026
Zervos said interest rate hikes are “not a uniquely American phenomenon,” pointing to Germany, France, Italy and Japan as countries where similar moves are being seen.
“The U.S. has performed exceptionally well in all of this compared to many other developed markets and smaller developed markets,” Zervos said. “That’s not America’s problem.”
