Please see below, an article from EPIC Investment Partners which discusses the external factors impacting the US bond market. Received today – 24/07/2026
For most of the past two years, investors have treated the US bond market as an extension of Federal Reserve policy. Inflation would fall, growth would slow, the Fed would cut rates, and long-term borrowing costs would follow.
That assumption is now being tested.
Treasury yields are increasingly being driven by forces the Fed cannot easily control: war, energy prices, government borrowing and the refinancing of debts accumulated during the era of near-zero rates. The Fed controls the overnight rate. It does not control oil prices, the federal deficit or the yield investors demand to finance the US government for 10 or 30 years.
Before the war with Iran, the 10-year Treasury yield was below 4 per cent. It has since risen towards 4.7 per cent, while the 30-year yield has moved above 5 per cent.
Part of that reflects reduced expectations of rate cuts. But investors are also demanding greater compensation for inflation, heavy Treasury issuance and fiscal uncertainty. This term premium may remain elevated even if the Fed eventually lowers short-term rates.
The pressure is magnified by the volume of debt due to be refinanced. Governments, companies, households and property owners benefited from the low-rate era. Debt issued at 1, 2 or 3 per cent does not immediately become more expensive when yields rise. The cost appears gradually as maturities arrive.
That delay can be mistaken for resilience.
This is the uncomfortable echo of 2007. Then, the hidden problem was deteriorating credit quality. Today, it is the delayed repricing of debt across the public and private sectors. In both cases, slow transmission risks being mistaken for evidence that the system has absorbed the shock.
Commercial property provides the clearest example. A building producing $10mn of annual net operating income is worth $250mn at a 4 per cent capitalisation rate. At 6 per cent, the same income supports a value of only $167mn.
A third of the value disappears without any fall in rents. Refinancing also becomes more expensive, while weaker growth may reduce occupancy. The borrower may avoid default by injecting equity or extending the loan, but the economic loss remains.
This matters because investors often respond to rising Treasury yields by moving towards equities, private credit, infrastructure or real estate. Yet those assets do not exist independently of the Treasury market. Their financing costs and valuations are built on top of the same sovereign curve.
Higher government yields raise corporate borrowing costs, reduce the present value of future cash flows and push property capitalisation rates higher. The alternatives to Treasuries therefore become less attractive partly because Treasury yields have risen.
For a while, the damage remains hidden. Existing loans are fixed, private assets are valued infrequently, and lenders extend maturities rather than recognise losses. But as debt rolls over, more income is diverted towards interest payments. Transactions slow, investment is postponed and hiring weakens.
Eventually, growth slows not despite high bond yields, but partly because of them.
That creates a perverse investment cycle. The rise in yields that makes Treasuries appear unattractive may create the weakness that ultimately makes them valuable again. As demand slows and inflation eases, investors may return to government bonds for income and capital protection.
The debt wall will arrive borrower by borrower and maturity by maturity. By the time its effects are visible, the rise in Treasury yields may already have created the conditions for their reversal.
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Alex Kitteringham
24th July 2026