Daily US

24 August 2026, 10:18 UTC Chief Investment Office GWM Investment Research

Navigating higher long-end yields UBS House View - Daily US Ulrike Hoffmann-Burchardi, Chief Investment Officer Americas and Global Head of Equities, UBS Financial Services Inc. (UBS FS) Mark Haefele, Global Wealth Management Chief Investment Officer, UBS Switzerland AG Jason Draho, Head of Asset Allocation, CIO Americas, UBS Financial Services Inc. (UBS FS) Daisy Tseng, Strategist, UBS AG Singapore Branch Jon Gordon, Strategist, UBS AG Hong Kong Branch Leslie Falconio, Head of Taxable Fixed Income Strategy, CIO Americas, UBS Financial Services Inc. (UBS FS) Kurt Reiman, Head of Fixed Income, Americas, UBS Financial Services Inc. (UBS FS) Alison Parums, Strategist, UBS Switzerland AG

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From the studio Podcast: Signal over Noise | How AI may complicate inflation signals, on Apple and Spotify (6 mins) Podcast: Jump Start | NVIDIA earnings, US PCE inflation, and European data (5 mins) Video: CIO Monthly | Kiran Ganesh on market drivers, scenarios, and opportunities (4 mins) Video: The AI Show | China tech earnings update and what's next (3 mins)

Thought of the day Long-dated US Treasury yields remain elevated despite the US government’s recent intervention, as markets await details of a fiscal consolidation plan signaled by Treasury Secretary Scott Bessent. Last week, the Treasury What to watch: 25 August announced that it would double the size of its planned USD 2bn buyback • RBA meeting minutes program in long-dated debt, and Bessent noted that the buybacks "could be more" than USD 4bn per operation. The move signals the importance • Germany Ifo business climate for August the US administration places on bringing down long-term borrowing costs. • US new home sales in July The 30-year Treasury yield closed above 5.27% on Friday, not far from its 2007 peak of 5.41%.

Higher real yields have driven the recent rise at the long end of the curve, with markets repricing the risk premium as fiscal and inflation concerns come back to the fore. Total US federal debt has crossed USD 40tr, the US-Iran war is still ongoing, and Fed Chair Kevin Warsh has offered little forward guidance on the central bank’s policy path. Persistently large US fiscal deficits are likely to require increased Treasury issuance, while the surge in longer-dated debt offerings by hyperscalers this year has added further upward pressure to long-term borrowing costs.

It is worth noting that long-end yields can rise when economic growth is gaining momentum. This could occur, for example, if advances in AI generate tangible productivity gains sooner than expected, while stronger AI monetization keeps capital expenditures elevated for longer.

This report has been prepared by UBS Financial Services Inc. (UBS FS), UBS Switzerland AG, UBS AG Singapore Branch, UBS AG Hong Kong Branch. Please see important disclaimers and disclosures at the end of the document.

For investors, the essential question now is how, if at all, to respond to the rise in yields. Our base case remains that yields should decline as inflation moderates. Such a benign macroeconomic outcome should support a continued broadening of the equity rally. Over the longer term, initiatives that result in financial repression and artificially bring down yields should also be favorable for equities, while gold would be another beneficiary of this scenario.

Focus on quality bonds with short- to medium-term maturities. We continue to favor quality bonds with short- to medium-term maturities, as they are less susceptible to volatility at the long end of the curve. Their attractive yields should also provide a meaningful cushion against further rate increases before price declines outweigh income returns. Our analysis indicates that US Treasury yields in the two- and five-year tenors would need to rise by around 100 to 230 basis points from current levels for capital losses to offset the income earned. This segment of the market should also benefit if rate hike expectations…