The treasury market is delivering its sharpest weekly drop since April, a worrying signal for borrowers.
Rather than retreating as markets brace for another Federal Reserve rate cut next week, the 10-year U.S. Treasury yield climbed 12 basis points over the week, nearing 4.14% — the highest level since April. Recent U.S. data has left bond traders unsure about the Fed’s pace of future cuts.
Longer-dated government debt sold off decisively this week, signaling a tougher environment for anyone hoping for relief from high borrowing costs. The 10-year note and the 30-year bond posted their worst weekly performances since April and May, respectively, as divergent data raised questions about how aggressively the Fed can trim rates in 2026.
Investors broadly expect a quarter-point cut next week, which would bring the Fed’s policy rate down to roughly 3.5%–3.75%. Yet expectations for next year are murkier, with a meaningful chance that rate reductions might stall through March.
These benchmark yields matter widely because they influence borrowing costs for households, businesses, and governments — from mortgages and auto loans to credit cards and major capital projects — and they determine interest payments on the national debt.
By Friday, the 10-year yield had risen to about 4.14% for the week, the steepest weekly move since April, while the 30-year yield rose toward 4.8%, matching the biggest weekly increase since May, according to Dow Jones Market Data. As prices fall, yields rise, reflecting the week’s selloffs in the underlying notes.
“Yields are climbing back toward the higher end of the range we’ve seen since summertime,” said Tom Nakamura, a currency strategist and co-head of fixed income at AGF Investments. The Toronto-based firm managed roughly C$60.4 billion in assets as of November. “The strength of recent data — from jobless claims to University of Michigan consumer sentiment — suggests the Fed may have less room to ease further.”
Thursday’s data showed initial jobless claims dropping to a more than three-year low of 191,000 for the week ending Nov. 29. Friday’s Michigan sentiment index rose 2.3 points to 53.3 in December, and inflation, as measured by the personal consumption expenditures price index for September, remained steady.
On the softer side, payroll processor ADP reported that private employers cut 32,000 jobs in November — the largest decline since spring 2023.
In the background, traders are watching rising Japanese yields and the potential for a Bank of Japan rate hike later this month. Some worry that Japan’s bond-market moves, tied to concerns about stimulus measures under Prime Minister Sanae Takaichi, could push U.S. yields higher.
“Globally, bonds are under pressure from fiscal policy — for instance, Japan’s rising yields reflect inflation fears tied to stimulative policies,” Nakamura noted. “Markets tend to process fiscal concerns in waves, and when one country highlights them, others—especially those with stimulative policies like the U.S.—come into focus.”
By session’s end, yields across 1- to 30-year maturities were higher, and all three major U.S. stock indices finished in positive territory, with the S&P 500 and Nasdaq marking a fourth straight day of gains.
— Vivien Lou Chen
