US Treasury Yields Reach Decade-Long High Amid Inflation Concerns

US Treasury yields have reached their highest levels since the early 2000s due to persistent inflation concerns, government spending pressures, and shifting Federal Reserve rate expectations. On October 3, 2026, the US 30-year Treasury yield surged intraday to 5.62% before settling at 5.592%, while the 10-year yield touched 5.34%. This trend has been driven by investors re-evaluating sovereign debt sustainability and persistent energy price risks.

Despite rising borrowing costs, equity markets have shown resilience due to strong corporate earnings linked to artificial intelligence infrastructure spending. According to Jefferies global equity strategist Chris Wood, the stock market has historically performed relatively well in such scenarios, particularly with the current AI capex cycle driving stellar earnings growth.

However, Wood highlighted three major concerns for equity investors: the sustainability of AI capital expenditures, structural bear market trends in G7 government bonds, and evolving global geopolitical shifts. Market expectations for an October interest rate hike fell to 50.4% following Federal Reserve Bank of New York President John Williams's comments that central bank officials do not need to rush further interest rate increases.