15 OCTOBER 2026
As this chart shows, the US 10-year Treasury yield has historically moved closely in line with nominal GDP growth.
At first glance, the recent rise in yields therefore looks justified by a strong economy.
US GDP growth has been running around 6% year-on-year in nominal terms (blue line), supported by large fiscal deficits and the surge in AI-related capital expenditure.
However, the picture becomes less convincing beneath the surface.
Trade activity and household consumption are showing signs of fatigue, whilst several forward-looking economic indicators point to a more subdued growth outlook.
This suggests any further increase in borrowing costs would be driven more by concerns over inflation and excess bond supply, rather than “good” economic growth.
Which matters because higher yields driven by stronger growth generally speak to a healthy investment backdrop.
Higher yields driven by inflation fears and debt issuance tend to be far less welcome.
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