The yield on the 10-year U.S. Treasury note is testing the 4.8% threshold; a sustained breach of this level could have material implications for other asset classes. Structural pressures in the bond market are accumulating. Over $8.4 trillion in U.S. government securities are scheduled to mature and roll over before year-end, while issuance of high-grade corporate bonds in September may hit a record high.
$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ The market is facing a critical test. Matt Maley, Chief Market Strategist at Miller Tabak + Co., pointed out that 4.8% was the previous high formed in January 2025. If yields remain above this level, the market could experience "substantial impacts."
In a report released last weekend, Maley wrote: "We remain concerned about the U.S. Treasury market... Widening fiscal deficits, massive bond issuance volumes, and strong corporate borrowing demand continue to exert upward pressure on long-term yields..."
He also noted that the U.S. Treasury Department and Treasury Secretary Scott Bessent have recently attempted to lower yields through verbal intervention, but "at least so far" have not achieved the desired results.
Previously, policymakers hoped to use verbal intervention to spur a rebound in U.S. Treasuries. At that time, investors were heavily shorting U.S. Treasuries, and relatively light trading activity during the summer provided favorable conditions for this strategy.
However, if the 4.8% threshold continues to be breached, it suggests that market concerns about U.S. fiscal conditions may begin to outweigh policymakers' efforts to influence borrowing costs. Maley believes that in such a scenario, the impact of fiscal issues on asset prices could broaden.
The U.S. budget deficit continues to widen, with the national debt exceeding $40 trillion, forcing the government to compete with corporations for limited investor capital. Maley expects that more than $8.4 trillion in U.S. government securities will need to be rolled over between now and the end of the year.
Meanwhile, investment-grade corporate bond issuance in September may hit a record high. Goldman Sachs has recently raised its forecast for 2026 U.S. dollar investment-grade bond issuance to $2.3 trillion.
This supply pressure in the bond market is not unique to the United States. Developed economies such as Japan, the United Kingdom, and France are also facing fiscal challenges, leading to broader shifts in the global bond market as investors demand higher risk premiums to absorb government debt.
A breach of 4.8% could transmit pressure to a wider range of assets.
Maley does not believe bond yields will rise indefinitely. Current bearish sentiment and extreme positioning could still trigger a strong rebound in U.S. Treasury futures, but he views such rallies as likely tactical moves rather than a reversal of the long-term trend.
The 5% yield on long-term U.S. Treasury bonds has long been a closely watched psychological threshold for the market. However, according to Ma Li, this threshold of market concern has steadily risen, passing through 4.4%, 4.5%, 4.6%, and 4.7%.
If the yield on 10-year U.S. Treasuries sustainably breaks above 4.8%, the impact may extend beyond the bond market. Michael Chen, General Manager of Noah ARK Hong Kong, stated that a disorderly rise in long-term U.S. Treasury yields could force a repricing of assets reliant on long-duration cash flows, including ultra-long-duration bonds, high-valuation growth stocks, commercial real estate, and certain private market assets.
He believes that structural pressures on U.S. Treasuries are accumulating, with "fiscal dominance" compelling investors to demand higher risk premiums for holding long-term U.S. government debt.
In terms of asset allocation, he favors gold and hard currencies as structural hedging tools, underweights ultra-long-duration U.S. Treasuries, and continues to allocate to high-quality equities, real assets, and AI-related physical infrastructure, including power generation, grid systems, energy storage, and data centers.
HSBC has also begun to adopt a more cautious stance toward long-duration bonds in developed markets. The bank has raised its forecast for the 10-year U.S. Treasury yield at the end of 2026 from 4.30% to 4.65%, citing a structural rise in the floor for long-term yields and a distribution of potential monetary policy outcomes that is increasingly skewed toward hawkishness.
HSBC also raised its forecast for the 10-year German Bund yield at the end of 2026 from 2.8% to 3%, stating that it remains cautious on long-duration bonds in developed markets.
Fiscal issues cannot be resolved by a single bond market rally
Ma Li is not focused on any single fluctuation in yields, but rather on whether fiscal pressures can be substantially alleviated.
Even if a short-term rebound in U.S. Treasuries leads to a decline in yields, and this trend persists until after the midterm elections, it does not necessarily indicate a change in the long-term trend. Ma Li stated that without "substantial changes" on the fiscal front, the issue cannot be genuinely mitigated in the long run.
This implies that 4.8% is not merely a technical level. For the market, the key observation is whether a breach of this threshold by U.S. Treasury yields will further alter investors' pricing of U.S. fiscal risks and the valuations of other assets.