Matt Maley, chief market strategist at Miller Tabak & Co., said U.S. Treasury yields face a significant test at 4.8%, and a sustained move above that level could cause “significant problems” for other asset classes.
“We remain concerned about the Treasury market as rising budget deficits, large debt issuances, and significant corporate borrowing continue to weigh on long-term yields. Meanwhile, Treasury’s jawbone has not (so far at least) been able to produce the desired rate reductions,” Maley said in a note late last week.
He said the continued movement of the 10-year Treasury yield above 4.8%, the all-time high reached in January 2025, is “particularly concerning” and could begin to cause broader problems for the market and indicate that policymakers’ attempts to influence borrowing costs are being overwhelmed by fiscal concerns.
Maley said recent efforts by the U.S. Treasury Department and Secretary Scott Bessent to lower yields have so far failed to generate the desired response. The effort came amid relatively thin trading conditions over the summer, with investors heavily shorting U.S. Treasuries, and policymakers hoping that verbal intervention could spark a meaningful bond rally.
Rather, he stressed, the episode highlights the growing difficulty of addressing market concerns without addressing underlying fiscal pressures. The U.S. budget deficit and national debt, now more than $40 trillion, are becoming increasingly difficult for investors to ignore, while the government competes for investor demand with massive amounts of corporate borrowing.
More than $8.4 trillion of U.S. Treasury debt will be rolled over between now and the end of the year, Maley said, making September potentially a record month for high-end corporate bond issuance. Goldman Sachs recently revised upward its 2026 forecast for investment-grade US dollar issuance to $2.3 trillion.
This pressure is not limited to the United States. Japan, Britain, France and other advanced economies face significant fiscal challenges, adding to broader changes in global bond markets as investors demand greater compensation to absorb government debt.
“None of this means the bond market will move in a straight line,” Maley said, noting that bearish sentiment and unreasonable positions could still cause a spike in Treasury futures. However, such a move could prove to be more tactical than indicating a reversal of a long-term trend.
While the 5% level has become widely seen as a long-term target for the Treasury curve, Maley said the market benchmark has repeatedly risen from 4.4% to 4.5% to 4.6% to 4.7%.
If the rate remains above 4.8%, it could have an impact beyond bonds. Noah Ark Hong Kong general manager Michael Chen said a chaotic rise in long-term government bond yields could trigger repricing across assets that rely on long-term cash flows, such as very long-term bonds, highly valued growth stocks, commercial real estate and some personal assets.
Mr. Chen said structural pressures on U.S. Treasuries are increasing as fiscal dominance prompts investors to seek greater risk coverage for long-term debt holdings. He favors gold and hard currencies as structural hedges and is underweight in very long-term government bonds, while maintaining exposure to blue-chip stocks, real assets, and AI-related physical infrastructure such as power, grids, energy storage, and data centers.
HSBC is also taking a cautious stance on long-term developed country bonds. The bank raised its end-2026 forecast for 10-year Treasury yields to 4.65% from 4.30%, citing a higher structural floor under long-term yields and a more hawkish distribution of potential monetary policy outcomes.
HSBC remains cautious about long-term bonds across developed countries, but raised its forecast for 10-year German Bundestag yields at the end of 2026 to 3% from 2.8%.
The key issue for Maley is that lower short-term yields don’t necessarily solve long-term problems.
“Even if there is a near-term rebound in the U.S. Treasury market (and thus lower yields) that lasts until the midterm elections…there is no long-term mitigation without significant fiscal changes,” he said.
