Top of Mind Rising US Treasury yields Q A

Group Economics - Top of Mind | 24 August 2026

• Rising US Treasury yields have been top of mind recently, so we tackle Nick Kounis Chief Economist some of the key questions put to us by clients

• Over the last few weeks, rising yields seem to be mainly term premia driven, which also corresponds to steeper curves • Treasury lacks the credible promise of overwhelming firepower, but the Fed would intervene temporarily if market functioning turns disorderly • Still, a durable solution requires significant fiscal adjustment: to stabilise the debt ratio, a fiscal consolidation of 2.5-3% GDP would be necessary • Term premia to rise given the outlook for issuance, lack of interest in consolidation and growing importance of price-sensitive investors • Outright US yields seen falling as we expect a dovish repricing of the Fed, so higher term premia will mostly be visible in steeper curves • Europe also faces challenges, with German issuance set to soar, though our key concern remains France

Introduction Rising US Treasury yields have been top of mind recently and we have had many client questions on what is driving the market, potential policy interventions and the overall outlook for long-term interest rates. Below, we tackle these issues in a short Q&A format.

What has happened in the Treasury market?

Since the start of July, yields have risen and curves have steepened significantly, with the 30y having risen just shy of 30bp over this period. Of course all this occurs against a longer-term background of rising yields more generally. For instance, earlier in the year, yields moved up as markets priced in more rate hikes on the back of rising energy prices and hence higher inflation. The key driver behind the more recent rise in yields appears to be the outlook for ongoing heavy bond issuance and the related terrible state of the US public finances. However, other factors such as uncertainty about the reaction function of the Fed and the competition provided by hyperscaler bond issuance seems to have also caused jitters. Meanwhile, expectations for policy rates have been volatile, but have not moved too much directionally since July. So the recent moves seem to be more term premium-led, which also corresponds to the steepening of the curve. Finally, the market got only temporary relief from the US Treasury’s interventions.

How is the Treasury intervening?

The US Treasury announced it would at least double the maximum size of its liquidity support buyback operations for US Treasuries with maturities between 10- and 30 years, to USD 4bn. This will start on the 9th of September and run until 4th of November. The move is another attempt by the US Treasury department to support the long end of the Treasury curve. So far this year, policymakers have taken several measures that have, directly or indirectly, tried to support longer-dated Treasuries, including: (i) increasing issuance at the short end of curve, (ii) facilitating JPY intervention, by selling EUR instead of USD, and by promoting the FIMA Repo Facility of the Fed for conducting currency interventions, as the Bank of Japan has done in the last few weeks (iii) increasing liquidity-support buybacks of long-term Treasuries.

The Treasury’s interventions have had only short-lived effects because they lack the credible promise of overwhelming financial firepower. To put the numbers into context, the US Treasury plans to issue USD 69bn of 30y securities and USD 42bn of 20y over the next 3-months alone. There are three buyback operations of 20y to 30y securities planned over the period in question, so ostensibly we are talking about EUR 6bn additional in buybacks in that segment, while overall net

supply will remain significant. What is more, over time, increasing buybacks would likely need to be financed by issuing more at shorter maturities, which will increase the refinancing risk of the maturing debt.

US Treasury yields US Treasury yield curves % %

4.0 0.6 Jul-26 Aug-26 Jul-26 Aug-26

Source: Bloomberg, ABN AMRO Group Economics Source: Bloomberg, ABN AMRO Group Economics

The Federal Reserve does have the balance sheet to make a more credible intervention in the Treasury market. Although new…