US Treasury Bond Storm: 30-year Treasury Yield Surges to 5.34%, Global Assets Usher in the Moment of Revaluation

As a critical "pricing anchor" for global assets, the yield on 30-year U.S. Treasury bonds has remained at a high level recently.

On August 18, the yield on 30-year U.S. Treasury bonds once rose to 5.34%, the highest level since 2008; it retreated slightly to 5.18% on August 27. Since 2026, the yield on 10-year U.S. Treasury bonds has continued to trend upward, with a cumulative increase of about 53bp (basis points) since the beginning of the year.

In addition, the yield on 30-year UK gilts once neared 5.86% that day, approaching the highest level since 1998, the yield on 30-year Japanese government bonds broke through 4%, and the yield on 10-year German government bonds rose to about 3.26%, exceeding the highest level since 2011.

Notably, statistics from research reports of Guotai Haitong Securities show that since 2007, 30-year U.S. Treasury bonds have stood above 5% only four times. The first three occurrences were mostly triggered by supply shocks and policy credibility issues, and eventually ended with policy shifts or risk-aversion events. But this time, in addition to factors such as high fiscal deficits and the resurgence of geopolitical conflicts, the huge financing demand of AI (Artificial Intelligence) tech giants has joined the fray, a situation that never appeared in the previous several crises.

Liu Chenming, chief strategist at GF Securities, believes that the main reason for this round of rising global long-term bond interest rates is the combined effect of renewed oil price and inflation risks, expanding government bond supply, continuous withdrawal of central banks from the bond market, and large-scale financing by AI enterprises that have collectively pushed up the term premium.

Brian Coulton, Chief Economist at Fitch Ratings, believes there are two possible factors behind the rise in U.S. long-term Treasury yields. First, the market's uncertainty about the prospect of Federal Reserve policy under the leadership of Kevin Warsh has increased. Today, the Fed hardly provides much forward guidance anymore, and Warsh has talked about the need to restore the Fed's credibility after several consecutive years of inflation exceeding the target. This most likely means that the Fed's real interest rate will remain at a relatively high level for a considerable period of time, although this is not yet very clear. Long-term Treasury yields must compensate investors for the risks they take by holding long-term interest rate positions (compared to holding short-term positions and rolling them over) — and as the uncertainty over the interest rate outlook for medium-term Treasury securities rises, this term premium has been on the rise.

"Second, an obvious change in the past few months is that the issuance of U.S. corporate bonds has risen sharply, as companies begin to borrow for IT capital expenditures. Until recently, this boom in IT capital expenditure was mainly supported by retained earnings and cash. But now companies are starting to enter the market to raise funds. This means that the government is facing more competition in the financing market against the backdrop of persistently large fiscal deficits," said Brian Coulton.

U.S. National Debt Surges Past $40 Trillion

On local time August 18, data released by the U.S. Department of the Treasury showed that the total U.S. federal debt exceeded $40 trillion for the first time in history, and the U.S. fiscal deficit in July was $432.3 billion. The next day, the U.S. Department of the Treasury issued an announcement stating that starting from September 9, 2026, the single-transaction size cap of the liquidity support repurchase operation for long-term Treasury securities will be raised from $2 billion to "at least $4 billion", a move aimed at stabilizing Treasury bond prices and the Treasury market.

On August 20, two Federal Reserve officials made public statements, both emphasizing that the Fed formulates monetary policy independently and is not affected by debt management or fiscal policy. Almusalem, President of the Federal Reserve Bank of St. Louis, said that the current financial environment remains loose, and he tends to support a rate hike at the September monetary policy meeting.

Then on August 24, the U.S. Department of the Treasury released signals again after further upward pressure emerged on long-term U.S. Treasury rates: two senior Treasury officials said the Treasury could use its nearly $1 trillion TGA account (Treasury General Account) funds to support its recently announced plan to increase government bond purchases.

Ming Ming, chief economist at CITIC Securities, believes that in the short term, the yield on long-end U.S. Treasury bonds is expected to remain at a high level. Although the Treasury's determination to prop up the market has reduced the risk of long-end U.S. Treasury rates breaking previous highs, factors including current U.S. fiscal pressure, rising corporate bond supply, uncertainty over Fed monetary policy and geopolitical risks are expected to continue to support long-end U.S. Treasury rates to stay at elevated levels in the short run. Escalating conflicts in the Middle East, rising crude oil prices, expanding monthly deficit gaps and increasing net financing size of the Treasury, better-than-expected key U.S. economic indicators, and more hawkish statements from the Fed may all create upward pressure on long-end U.S. Treasury rates, otherwise the pressure on U.S. Treasury rates will ease to some extent.

AI Enterprise Bonds "Snatching Funds" from U.S. Treasuries?

Another view holds that large-scale capital expenditure by U.S. AI giants maintains high growth, translating into large-scale long-term financing demand that produces a crowding-out effect on long-term U.S. Treasury bonds.

Under this round of AI capacity expansion cycle, leading U.S. AI tech giants continue to increase capital expenditure and issue additional bonds. Tech giants, who used to be suppliers of market capital, have now turned into capital demanders. Data from London Stock Exchange Group shows that tech giants including Alphabet, Amazon and Meta have issued nearly $220 billion in bonds since 2026, far exceeding the bond issuance size of about $108 billion for the whole of 2025.

At the same time, NVIDIA and Broadcom are cooperating with private credit institutions and asset management firms to build financing platforms to provide financial support for customers to purchase chips, deploy servers and build data centers. AI financing has gradually expanded from direct corporate bond issuance to areas such as private credit, equipment leasing and project financing. Morgan Stanley estimates that the global AI-related debt issuance size in 2026 may approach $570 billion.

In August, Alphabet, Google's parent company, is preparing to issue its first Australian dollar bond since its listing, with planned maturities of 3-year, 5-year, 10-year and 20-year tenors. Previously, Alphabet has entered the U.S. dollar, euro, pound sterling, Swiss franc, Canadian dollar and Japanese yen bond markets, among which the U.S. dollar bond issuance completed in early August reached $25 billion.

Alphabet is not an isolated case. Goldman Sachs estimates that the five hyperscale computing enterprises including Microsoft may reach $250 billion in bond issuance size in 2026, and further rise to $400 billion in 2027.

The research report of China Merchants Securities points out that against the backdrop of the stable total amount of long-term allocated capital such as insurance and pension funds, bond issuance by AI giants diverts market funds, squeezes out the allocation demand for U.S. Treasuries, and pushes up long-term U.S. Treasury rates and term premiums. Whether this pressure can be eased later largely depends on the speed at which AI investment is transformed into stable revenue and free cash flow. If the earnings of relevant enterprises continue to grow and the coverage capacity of internal cash flow for capital expenditure improves, their debt financing demand and the resulting duration supply are expected to gradually decline; however, at the stage when earnings realization is not yet sufficient, AI construction may still become a structural disturbance to long-end interest rates.

What Impact Will It Have on Major Asset Classes

As the "long-term anchor" for global asset pricing, what kind of pricing impact will the 30-year U.S. Treasury bond exert on global stocks, gold, commodities and non-U.S. currencies respectively after its yield breaks through the new high since 2007?

At the end of June this year, the international gold price once fell below the $4,000 per ounce mark; from July to August, the gold price started a rebound, successively breaking through the two thresholds of $4,200 per ounce and $4,300 per ounce, and has now returned to near the $4,600 per ounce level.

West China Securities believes that if the U.S. Treasury bond issue continues to ferment and yields keep rising, the asset that may benefit the most is gold. Because when the market continues to worry about U.S. debt risks, selling U.S. Treasuries is often accompanied by selling the U.S. dollar, risk aversion sentiment will rise, and gold will benefit relatively. In terms of suppressed assets, U.S. Treasuries bear the brunt, and assets such as the U.S. dollar and U.S. stocks will also face considerable pressure.

Of course, if a solution is found to ease the U.S. Treasury bond issue and yields decline, the pressure on relevant assets will be mitigated to some extent.

Brian Coulton said that the 10-year U.S. Treasury yield is actually a more important global benchmark, and it is also continuing to rise. This will raise the cost of global U.S. dollar credit, as the U.S. dollar still dominates the global credit system.

Chen Xing, chief macro analyst at Caitong Securities, said that in terms of the domestic stock market, the Hong Kong stock market will most likely remain under pressure. On the one hand, the rising U.S. Treasury yields raise the return on U.S. dollar assets, increasing the depreciation pressure on the Hong Kong dollar under the linked exchange rate system and suppressing the valuation level of the Hong Kong stock market; on the other hand, the recovery of domestic domestic demand is weaker than expected, the earnings recovery of heavyweight sectors in the Hong Kong stock market is relatively weak, coupled with the fact that leading internet enterprises face squeezed profits due to increased AI investment, there is pressure on performance realization.

Regarding A-shares, Chen Xing believes that the upward A-share market since 2025 has been mainly driven by RMB appreciation, and the core incremental capital comes from the expansion of domestic liquidity brought by stronger willingness of enterprises to settle foreign exchange, which has reduced A-shares' dependence on overseas capital flows. In this context, the upward movement of U.S. Treasury yields has a relatively limited overall impact on A-shares, but in the short term, the rise in U.S. Treasury rates will directly constrain the valuation of long-term cash flows.

This article is from the WeChat official account "Economic Observer", author: Cai Yuekun, authorized for release by 36Kr.