To The Moon

Interest rates on government bonds are rising again, making borrowings more expensive for consumers and businesses.

It also heightens concerns about whether governments are issuing more debt than financial markets can handle?

Rising bond yields are one of the few forces in the world strong enough to get politicians to snap to attention.

They can also have a big impact on US citizens’ personal finances and on the broader US economy.

The bond market can dictate (a) how much ordinary people have to pay on their mortgages and car loans, as well as (b) how much consumers earn from their savings accounts and 401(k) plans (that is equivalent to Singapore's CPF Investment Scheme (CPFIS).

Gradual bubble up of Treasury yields.

With fighting flaring up again in the Middle East since Sun, 30 Aug 2026, this has caused oil prices to jump (again) and renewing inflation worries.

Investors typically demand higher interest rates, or yields, on government bonds when inflation is high or they think it may get worse.

On Tue, 01 Sep 2026, yield on US 10-year Treasury, that strongly influences mortgage rates, reached 4.80%, the highest since early 2025.

While the 5-year Treasury, a benchmark for auto loans, touched its highest level since October 2025 at 4.55%.

Deep dive:

What’s pushing up bond yields?

Besides inflation concerns, other factors are also pushing bond yields higher:

(1) Annual U.S. government budget deficits remain higher than they were before the pandemic, forcing the government to borrow more to pay all its bills.

(2) Large tech firms are also borrowing heavily to build out the data centers powering AI.

And last Friday at the annual Jackson Hole symposium, Fed chair Kevin Warsh signaled that the central bank may still have to lift its short-term rate in the coming months if inflation stays stubbornly elevated.

Rising yields have caught the attention of US Treasury Secretary Scott Bessent, who on 19 Aug 2026, announced an unusual intervention in the bond market to restrain rising yields.

According to Brookings Institute, Senior fellow, Robin Brooks:

• Bessent’s moves and Warsh’s promise to ringfence inflation have likely kept longer-term rates lower than they would otherwise be, while showing growing worry about rising yields.

• Investors should pay attention because market tension is building, as shown by policymakers starting to panic.

Yet Bessent downplayed the overall rise in US yields in a conversation Tue, 01 Sep 2026 with Fox Business host Larry Kudlow, on the sidelines of the G20 finance ministers’ meeting in Asheville, N.C.

Bessent said:

• “I don’t think we are in any kind of a dire situation”.

• And argued that other countries’ bonds have seen bigger yield increases.

All this, despite his former mentor Stanley Druckenmiller has warned about Treasury Secretary’s latest moves. (see above)

What is a Bond market ?

When governments & big companies borrow money, they don’t ask a bank for a loan.

Instead, they sell IOUs to investors and promise to repay the money with a certain interest rate.

• When those IOUs are set to be repaid many years from now, they’re called bonds.

• When those IOUs are repay quickly (within a few months or years), they’re called bills or notes.

US bond market investors often buy & sell these bonds after they’re issued, while the bonds continue to pay the same interest rate.

As and when a bond starts to look less attractive (eg. rising current interest rate or rising inflation etc..), a buyer can get bonds that were earlier worth $100 for less than that.

A drop in price means a new buyer will get a bigger return, percentagewise, on their money than the interest rate the bond pays on its face value.

Those payments are called bond’s yield.

Bonds’ dumping.

When investors sell bonds or buy fewer of them than they did in the recent past, that pushes bond prices down, just like a stock market sell-off causes stock prices to plunge.

When bond prices fall, that lifts bond yields, which move in the opposite direction.

During the covid pandemic, Trump has ramped up borrowings to support laid-off workers and idled businesses, but he & Biden, have not cut back since.

According to Brooks:

• Investors are getting increasingly worried about how sustainable all the borrowings are.

• They are demanding higher yields as compensation for taking on what they see as greater risk.

• Rising global instability, with ongoing wars in Ukraine & Iran, did not help the situation.

• US bond market is falling as a consequence of the massive spending during the covid pandemic. The past actions are catching up with the US economy.

Example - US govt bond market set interest rates, affect people

The easiest example is mortgage rates:

• Rates for these loans tend to follow the path of 10-year Treasury yields.

• The average 30-year fixed-rate mortgage is near its highest level in a year, discouraging people (already worried) the price of homeownership may be too high.

In general, higher yields and rates benefit savers:

• It means they are earning more from lending money to US government.

• Parking their cash in a high-yield savings account.

Conversely, higher yields and rates, hurt borrowers.

They also drag on prices for stocks, gold and even cryptocurrencies.

High yields on risk-free US Treasuries draw capital away from riskier investments like stocks and cryptocurrencies, pulling their prices down in the process.

US Debt Clock as of 02 Sep 2026

Bond market concerns.

It’s no secret that US government has incurred a lot of debt. (see above)

Officials at the Federal Reserve, economists, investors and many other voices have been saying for years that US government is on an unsustainable path with how much it spends versus what it brings in.

In July 2026, the Congressional Budget Office (CBO) estimated the federal government’s budget deficit would top $2 trillion this year (2026), equal to about 6% of US economy - an unusually high figure outside recessions & wars.

US government also said last month that its total debt (cumulative total of all the deficits) has reached an enormous $40 trillion.

No one knows if or when this debt will trigger a full-blown crisis. If panic hits, investors might rush to sell off their US bonds, pushing interest rates up sharply.

Although rates have been rising, but not fast enough to indicate a crisis has started. This is good to know.

Importantly, market indicators also show that investors are not currently panicking about major governments failing to pay back their debts.

Treasury yields vs Stock market.

Rising US Treasury yields are already affecting US stocks.

On 01 Sep 2026, the 10-year Treasury yield rose to roughly 4.78 –4.80%, while the $S&P 500(.SPX)$ fell about -0.7% and the $NASDAQ(.IXIC)$ dropped by -1.03%.

Technology and semiconductor shares were hit particularly hard.

Latest market situation.

The Treasury’s official yield-curve data show that the recent rise has extended across maturities, with long-term yields near or above 5% in the latest update. (see below)

As of 02 Sep 2026 8:30pm Asia time

Market pricing has also shifted sharply toward the possibility of a September 2026 rate increase after Fed Chair Kevin Warsh adopted a hawkish tone and said further action could be needed if inflation does not move convincingly toward 2%.

The 2-year yield is particularly important for immediate market reactions because it closely follows expectations for Fed policy.

The 10-year yield matters more for equity valuations, mortgages and long-term financing.

Impact & Effect.

When interest rates (yields) go up gradually, stock prices can usually adjust without major problems.

However, if yields jump quickly, rising by even 0.10 - 0.20% over a few days, it triggers immediate pressure because investors must quickly recalculate stock values and reallocate their money.

Vulnerable Stocks.

Investment most sensitive to yields fluctuations includes:

• High-growth technology companies.

• Semiconductor and AI stocks.

• Unprofitable or highly valued companies.

• Small-cap growth stocks.

• Real-estate investment trusts and utilities.

• Companies that depend heavily on debt financing.

Note:

"Risk-free" rate (aka treasury yield) acts as the discount rate in Discounted Cash Flow (DCF) models. As yields rise, the present value of future earnings decreases.

High-growth tech stocks and long-duration equities suffer the heaviest re-ratings.

Above stocks will be ‘most’ impacted because a higher discount rate reduces the present value of future cash flows.

Higher bond yields also make Treasury securities more competitive with stocks.

Nasdaq is therefore likely to react more sharply than the Dow when yields rise quickly. Recent decline in Nasdaq while the broader market also fell, is consistent with that pattern.

What’s more, current pressure is likely to persist beyond a single trading session.

This is because several forces are operating at the same time:

• Higher oil prices.

• Increased expectations for Fed tightening.

• Large government borrowing needs.

• Global bond sell-off.

One other thing to note is US stock market does not necessarily decline continuously while yields remain high.

If yields stabilize, investors may refocus on earnings, economic growth and corporate productivity even at a relatively high yield level.

How long will this last?

The impact will persist as the underlying macro drivers keep yields elevated.

Market consensus points to elevated bond yield pressures persisting through late 2026 and into early 2027.

3 persistent structural forces sustain high yields:

Fiscal Deficits & Supply:

• US annual deficit closing near $2 trillion, forces continuous heavy auction volumes of new Treasuries.

Hawkish Central Bank Stance:

• Sticky inflation and elevated oil prices keep US Federal Reserves signaling prolonged pause periods or potential short-term rate hikes rather than quick cuts.

Corporate Supply Pressure:

• Ongoing corporate debt issuance (including AI infrastructure buildouts) continues to crowd out liquidity.

• 4 of 7 Magnificent seven members have tapped corporate debt markets, to raise massive multi-billion-dollar bond issuances to fund their expanding AI data centers, GPU fleets, and infrastructure buildouts.

• They are: $Amazon.com(AMZN)$ ($100 billion), $Alphabet(GOOG)$ ($52 billion), $Meta Platforms, Inc.(META)$ ($60 billion) and $NVIDIA(NVDA)$ ($25 billion).

Unless economic growth slows dramatically, this high-yield pressure regime on equities is expected to remain through H2 2026.

My viewpoints : (mine only)

I think in the near term:

• Risk remains tilted toward volatility.

• Further pressure on high-valuation technology stocks, particularly ahead of major employment, inflation and Federal Reserve events.

Base case:

• If US treasury 10-year yield remains near 4.75 – 4.85%, stocks may trade unevenly rather than collapse.

• A sustained break above 5% would intensify valuation pressure, especially if accompanied by a rising 2-year yield and higher oil prices.

Bullish reversal:

• If the 10-year yield drops to 4.50 – 4.60%, the 2-year yield also falls, and inflation expectations ease, investors are more likely to shift focus back to stocks.

The key issue is not simply the yield level. It is (1) how quickly yields rise, (2) why they rise, and (3) whether the move changes expectations for Fed policy and corporate earnings. Do you think so too?

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