Traders now put better than 72% odds on another Fed hike in October
The US 30-year Treasury bond yield traded more than 2 basis points higher at 5.585 percent on Tuesday, after jumping earlier in the session to just above 5.6 percent, its highest level since June 2002.
CNBC reported the 10-year US Treasury note yield, the benchmark for US mortgage borrowing, auto loans and credit card debt, traded about 1 basis point higher at 5.253 percent, while the 2-year note yield fell more than 3 basis points to 4.891 percent.
The long bond yield last reached 5.644 percent in June 2002.
Investors remain focused on inflation and worry more about US fiscal deficits and Treasury supply, which leads them to expect a higher term premium, JoAnne Bianco, senior investment strategist at BondBloxx Investment Management, told CNBC.
Traders are pricing a more than 72 percent chance of another Fed rate hike in October, according to the CME FedWatch tool cited by CNBC.
The Federal Open Market Committee voted 12-0 earlier in September 2026 to raise its main interest rate by 25 basis points, with analysts split over how many further hikes the Fed delivers.
Two-year US Treasury yields have risen almost 60 basis points in September 2026, the biggest monthly jump since early 2023, Reuters reported.
Ten-year yields are set for a rise of around 50 basis points, the largest monthly move since 2022, and the ICE BofA MOVE index has climbed almost 30 percent in the month.
"There's a realisation that the whole energy story and inflation story will not go away in the very short term," Kenneth Broux, head of corporate research for FX and rates at Societe Generale, told Reuters.
Charu Chanana, chief investment strategist at Saxo, told Reuters the repricing runs deeper than the next few central bank meetings and "I do think we are moving towards a structurally higher-yield regime."
The benchmark 10-year Government of Canada bond yield closed at 3.96 percent on Monday, Bank of Canada data shows, with the average yield on issues maturing beyond 10 years at 4.20 percent.
The 10-year yield briefly reached 3.998 percent on September 24, 2026, its highest in more than three years.
The Bank of Canada held its policy rate at 2.25 percent on September 2, 2026, a seventh consecutive hold, noting long-term bond yields had risen globally, including in Canada.
Governor Tiff Macklem said there had been some "spillover" into Canada's bond market while Canada's yield curve sits well below that of US government debt, CBC News reported, though Canadian yields have been pulling away from US levels as domestic factors take hold.
Canadian fixed-rate mortgages and auto loans are linked to five-year and 10-year Government of Canada bonds, CBC reported.
Lotfi Karoui, multi-asset credit strategist at PIMCO, wrote that evidence AI-related bond issuance is crowding Treasuries out of portfolios is weak.
An event study of six surprise hyperscaler deals found no statistically significant move in 10-year Treasury yields, term premium or swap spreads.
Karoui wrote that the roughly US$1tn in hyperscaler capex expected this year consumes the same real resources whether funded by debt, retained earnings or equity, and put the Treasury market at US$32tn.
Hyperscaler bond sales have more than doubled this year to over US$200bn, according to LSEG data cited by Reuters, after AI issuance outpaced the whole of 2025 in eight months.
Warburg Pincus chief executive Jeffrey Perlman said at a Singapore conference on Tuesday that "deals can work at a 5 percent 10-year," Reuters reported.
