This month, we’re going to jump into a corner of the Treasury market that, for the most part, has not historically been reserved for individual investors. But it may be creating some headwinds for investors.
We’re talking about the 30-year Treasury bond.
Institutions such as pension funds, insurance companies, and endowments more commonly own the 30-year Treasury bond because they often have long-term liabilities extending decades into the future. Buy a maturity stretching out decades and match its guaranteed income with a corresponding liability.
If individual investors generally avoid this market, why is this important?
Investors often compare stock returns to what they can earn in risk-free Treasury yields. Since there is no risk of default, higher yields can encourage some investors to reallocate funds away from stocks in order to capture that higher return.
Last month, the 30-year Treasury reached its highest yield since 2007, rising about 5%, according to data provided by the St. Louis Federal Reserve. Bloomberg News said its gauge of global government bonds reached its highest level since 2008.
Key Index Returns | ||
| August 2026 % | YTD % |
Dow Jones Industrial Average | 1.3 | 10.7 |
Nasdaq Composite | 3.9 | 13.5 |
S&P 500 Index | 2.6 | 12.3 |
Russell 2000 Index | 0.9 | 19.1 |
MSCI World ex-USA** | 2.0 | 12.0 |
MSCI Emerging Markets** | 3.2 | 22.4 |
Bloomberg US Agg Total Return | 0.4 | -0.3 |
Source: Wall Street Journal, MSCI.com, Bloomberg, MarketWatch
MTD returns: July 31, 2026—August 31, 2026
YTD returns: December 31, 2025–August 31, 2026
**in US dollars
During a period of modest GDP growth and a soft labor market, bond yields might be expected to ease.
They haven’t.
What’s going on? Bondholders are focusing on several factors, including:
- The large federal deficit and the need to issue new bonds to finance the deficit
- Concerns about stubbornly elevated inflation
- A greater insistence on a premium to lock up funds for long periods
- Recent questions about Fed credibility
- Rising corporate debt issuance to fund the AI buildout; some view this as a secondary factor
Let’s explore bullet point #4 in greater detail.
At the July Federal Reserve meeting, recently installed Fed Chair Kevin Warsh repeatedly emphasized that inflation remains too high and that restoring price stability is a top priority.
Yet, despite his tough rhetoric, the Fed left interest rates unchanged, and Warsh offered little clarity on how policymakers intend to bring inflation back to the Fed’s 2% target.
If inflation is indeed the primary threat and higher interest rates remain the Fed’s most powerful tool, investors naturally expected action or a clearer path forward.
Instead, the absence of both raised questions about the Fed’s resolve, and long-term Treasury yields responded accordingly, testing Warsh’s resolve.
For many investors, the issue was not whether Warsh was overly hawkish or overly dovish. Rather, it was the disconnect between his forceful language on inflation and the lack of a corresponding policy response.
In the market’s view, defeating inflation requires more than forceful rhetoric.
By stressing the problem while offering little guidance on when, how, or what might trigger the Fed to act, Warsh left investors unconvinced, and the bond market delivered its verdict through higher long-term yields.
At a late August speech, Warsh helped address some concerns, explicitly warning that the Fed may need to tighten policy if inflation fails to make “sufficient and clear” progress toward its 2% target.
Given the rise in yields, US Treasury Secretary Bessent announced new plans to repurchase additional outstanding 10- to 30-year securities, which, in theory, raises demand for those bonds and puts downward pressure on yields (yields and prices move in opposite directions).
Bloomberg News reported near the end of August that “key market metrics and positioning show that it’s having an impact.” However, questions remain longer-term.
Despite the recent uptick in yields, 5% is not really that unusual. In fact, it is closer to the long-term historical average than the exceptionally low yields investors became accustomed to after the 2008 financial crisis.
As we enter September, a historically weak month for stocks, investors have largely shrugged off the rise in yields so far, as booming corporate profits continue to provide a powerful tailwind for equities.
Put another way, higher yields may not have derailed the market’s advance so much as tempered its pace.
I trust you found this review insightful. If you have any questions or would like to talk through your portfolio or other financial goals, please don’t hesitate to reach out to me or anyone on our team.
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