On a "Trumponomics" podcast episode published on 2026-09-17, host Stephanie Flanders, Head of Government and Economics at Bloomberg, discussed the recent surge in the US 10-year Treasury yield with guests John Authors, a Bloomberg Opinion columnist, and Jamie Rush, Bloomberg's Director of Global Economics. The conversation centered on whether 5% could become the new floor for this crucial financial indicator and the broader implications for the global economy.
Flanders highlighted that the US 10-year Treasury yield, which represents the rate the federal government borrows at, had breached 5% for the first time in several years on Monday, reaching 5.04% on Tuesday – its highest since 2007. This marks a dramatic rise from 1.3% five years prior, an unprecedented increase in "living memory." She emphasized the yield's profound importance, as it historically sets the tone for virtually all private lending rates in the US and heavily influences borrowing costs worldwide, arguably making it "the single most important price in the world."
John Authors explained that while the Federal Reserve controls short-term rates, the current higher bond yields are driven by structural forces that the Fed cannot easily influence. He identified several factors behind the rise: a world becoming "somewhat more expensive" due to de-globalization, the enormous quantum of government debt necessitating higher rates to attract lenders, and significant borrowing to fund AI data centers. Authors noted that AI investment is a "real new investment in new capital in some decades," potentially consuming a proportion of US GDP comparable to the Marshall Plan for Western Europe or FDR's New Deal. These private sector actors, despite strong credits, are creating substantial demand for capital, pushing up lending rates. He suggested that if the current tightening cycle continues, the 10-year yield could reach 6% within 12 months, a level not seen during the entire Reagan presidency, yet still not the "end of the world." However, he cautioned that much of the financial edifice, built on the keystone of the 10-year yield, has not been tested at such high levels, and many current market participants lack personal experience with them.
Jamie Rush elaborated on the long-term structural forces pushing up yields. These include demographics, with the baby boomer generation's saving bulge for retirement now moving through the labor market, altering savings patterns. Productivity growth, slow for a long time, is now picking up, potentially accelerated by AI. This technology is creating a significant demand for capital, and because the potential returns and productivity gains from AI are so large, these investments are "very price insensitive" to interest rates. Coupled with government debt consistently hitting new highs, these factors point towards sustained higher yields.
Authors also offered a "positive spin" on higher yields, suggesting they indicate "something is going right." If the "price of money needs to go up to ration all the different uses people now have for it," and nominal GDP is rising healthily, it can be seen as a positive sign. He noted that yields were artificially held low for years due to interventions like quantitative easing, and their current rise represents a "removal of an unnatural state of affairs" and a return to more efficient capitalism.
The discussion then turned to attempts to control yields, specifically by Donald Trump and his Treasury Secretary, Scott Besant, who have expressed desires to lower them. Jamie Rush questioned the efficacy of fighting global market fundamentals, suggesting it would likely lead to "financial repression" with high costs. John Authors described Besant's efforts, including increasing a debt buyback program, as "histrionics" that "backfired," with yields rising despite his actions. Authors suggested that Besant's old boss had even recommended traders "call Mr. Besant's bluff."
Flanders raised the idea of global financial repression, questioning if a future Trump administration might use diplomatic pressure to force countries to invest foreign exchange reserves in Treasuries. Jamie Rush acknowledged this as a "reasonable threat," noting potential targets like Japan or state pension funds. However, he warned it could lead to a "merry-go-round" of asset reshuffling without significantly impacting US borrowing costs, as other dollar assets might be sold to finance Treasury purchases.
Regarding potential "painful transitions," Jamie Rush primarily pointed to sovereigns, as going from low to high rates dramatically increases debt servicing burdens. He also mentioned companies that borrowed at low rates post-pandemic. John Authors highlighted the US housing market as the "number one" concern, noting it has largely come to a standstill, and low-rate mortgages from the pandemic era will soon be expiring. While he doesn't foresee a 2007-style crisis, it remains an economic problem. He concluded that while AI is a macroeconomic factor bailing out other problems, if high yields choke off data center economics, it would be profoundly impactful. Ultimately, the panelists agreed that while there are many worries in the world, a 5% or even 6% US 10-year yield is not inherently one of them, "except possibly if you're Donald Trump."