The 10-year Treasury yield touched 5.36% on Wednesday. The 30-year reached 5.73%. Both were the highest since 2002, as another round of selling swept through government bond markets.
It was not only a U.S. story. French and Italian benchmark bonds also climbed sharply, and the yield on Britain’s 30-year gilt hit its highest since 1998.
An auction that helped
Yields eased later in the day after the Treasury sold $39 billion of 10-year bonds to strong demand. The auction still came at 5.3%, the highest rate on a U.S. 10-year sale since November 2000.
“Bottom line, for whatever reason, likely the 24 yr highs in rates, brought out the buyers and resulted in a great auction,” wrote Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. The 10-year yield, he noted, fell back to 5.27% from 5.31% just before the results.
Stocks had sold off early, then recovered most of the loss as yields came down. The S&P 500 and Nasdaq, both at record highs the day before, closed down about 0.2%. The Dow lost 341 points, or 0.6%, and the Russell 2000 fell 1.3%. European markets took a harder hit: the Stoxx 600 ended down 1%, France and Germany’s benchmarks about 1.3% lower, and Italy’s FTSE MIB 2.5% lower. Brent crude slipped 0.5% but stayed above $100 a barrel in the afternoon.
Debt and the AI borrowing boom
Governments worldwide have seen their borrowing costs soar since January. Kristalina Georgieva, head of the International Monetary Fund, warned overnight that they need to bring record debts under control. She expects bond yields to stay under pressure because of the AI boom.
“Policymakers had a relatively easy ride over the last 17 years, as for all that time interest rates were stuck below GDP growth rates,” she said in a speech. “Higher interest rates now put an end to that.”
Her remarks came after multiple reports that Elon Musk’s SpaceX plans to raise $40 billion in cash to buy AI chips from Nvidia. NBC News said it had not independently confirmed the reports, and SpaceX did not immediately respond to a request for comment. The money would join hundreds of billions of dollars in bonds that AI-linked companies have sold in recent years to build data centers and equip them. Some economists think that borrowing could push government yields higher still. Huw van Steenis, an economic strategist at Apollo, wrote that hyperscalers have raised $48 billion in bonds in European currencies this year, more than triple the whole of 2025.
Ed Yardeni, president of Yardeni Research, was blunter about France. “France may be on the verge of a full-blown debt crisis,” he wrote on Sunday. He pointed out that French 10-year yields have risen more than those of any other major economy this year. The U.S. is second. Italy, which bond markets have long treated as the riskier credit, is third.
