author avatar
Mark Chandik

May 26, 2026

Bond Yields on the Rise

What’s driving bond yields higher? Since the recent low, the 10-year Treasury yield has climbed nearly three-quarters of a percentage point. The 10-year is a key benchmark because many borrowing rates, including mortgage rates, closely track its movements.

We’ve also seen a significant rise in the yield for the 2-year bond. The 2-year yield is considered a proxy for the eventual direction of the all-important fed funds rate.

The graph highlights that the 2-year yield has moved above the fed funds rate. Over the last 30 years, the Fed has hiked the fed funds rate every time this has occurred, according to BCA Research.

The 30-year Treasury bond yield (not shown above) recently reached its highest level since 2007, according to Bloomberg.

Why are yields rising?

  1. Markets believe that the Federal Reserve will eventually be forced to raise interest rates.
  2. The reason: the rate of inflation is rising.
  3. In addition, the economy has been more resilient than many had expected.
  4. Consumer spending has held up in the face of higher gasoline prices (at least so far).
  5. Business investment has soared amid the build-out of AI data centers. In the short run, that increases the demand for resources, which may be putting upward pressure on prices at a time when oil and other commodities have risen in price.

In the absence of an immediate increase in the fed funds rate (unlikely), the bond market is tightening financial conditions by pushing bond yields higher.

Earlier in the year, however, there were expectations that the Fed might cut rates later in the year.

Incoming Fed Chairman Kevin Warsh has said he favors lowering the fed funds rate. He has also advocated numerous changes at the Fed.

But he’ll have to persuade skeptical Fed officials that have put the possibility of a rate increase (or increases) on the table, according to the minutes released from the April Fed meeting. Stay tuned.

Finally, this Memorial Day, we take the time to honor those who gave their lives in service for our nation, remembering that our freedoms are an enduring legacy of their sacrifice.

author avatar
Mark Chandik

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Adviser and Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA/SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333-2431 800.765.5201 Prosperity Partners and FDP Wealth Management, LLC are separate entities from ValMark Securities, Inc. and Valmark Advisers, Inc. Prosperity Partners, FDP Wealth Management, LLC, ValMark Securities, Inc., Valmark Advisers Inc., and their representatives do not offer tax advice. You should consult your tax professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

Indices are unmanaged and do not incur fees, one cannot directly invest in an index. You should consult your tax professional regarding your individual circumstances. This information is provided by Financial Jumble, LLC. Financial Jumble, LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

RELATED POSTS

A Hotter August CPI Builds Rate Hike Momentum

First, let’s clarify that any attempt to predict the Federal Reserve’s actions this week is, at best, an educated guess. Fed Chair Kevin Warsh has struck a hawkish tone, and the odds of a quarter-point increase in the fed funds rate are 87%, according to the CME Group. It was 59% on September 4.

Behind the Jobs Report

On Friday, the US Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by a much greater-than-expected 162,000 jobs in August. The unemployment rate held steady at 4.1%.

Location Location Location

The graphic below compares the change in home prices, adjusted for inflation, for various US cities. For example, the average USA home price has topped inflation by 238% since 1948. Why has there been such a wide trajectory in prices, and why have they proven so persistent?

Rising Yields Faily to Derail Stocks

This year, the stock market has risen significantly. Lingering worries about oil prices, inflation, the war with Iran, and the possibility of an AI bubble haven’t subsided. But the economy is expanding, corporate profits have been strong, and the S&P 500 Index set a new high last week, according to the Wall Street Journal.

All Gas, No Brakes: Profits Soar in Q2

In a solid earnings season, we’d generally expect S&P 500 companies to deliver double-digit profit growth, meaning earnings growth of at least 10% versus a year ago (20% tops). That’s not a hard-and-fast rule, but it provides a useful benchmark for evaluating the strength of a quarter.