What’s driving the rise in bond yields?

The rise in Treasury yields in 2026 is being driven mainly by higher real yields rather than by changing long-term inflation expectations.

• The 10-year Treasury yield has risen by more than one percentage point in 2026, reaching its highest level in nearly 20 years.
• The market-implied five-year, five-year forward inflation rate has remained close to 2.5% as of October 15, 2026.
• The gap between nominal yields and expected inflation points to a larger real-yield premium as the main source of the increase.
• Possible drivers include a resilient economy, uncertainty about monetary policy under new Federal Reserve leadership, and concern about the $40 trillion federal debt burden.
• Continued increases in yields could weaken the economic outlook and place pressure on the equity bull market.

Takeaway: Investors should monitor real yields, Federal Reserve policy uncertainty and fiscal concerns as the key forces behind bond-market weakness, with further increases posing risks to fixed income and equities.