U.S. Treasury yields have climbed since late June, driven by investor concern over the Federal Reserve’s policy direction and rising term premiums on long-dated bonds, according to Wolfe Research.
The 2-year yield rose 6 basis points, the 10-year increased 4 basis points, and the 30-year gained 1 basis point in recent sessions. Wolfe attributes the move to uncertainty following the appointment of a new, untested Fed president, prompting demand for higher compensation to hold longer-term debt. The firm also notes that the U.S. Treasury’s recent interventions—including a yen-buying operation and an expanded bond buyback program—have been underestimated by markets as potential support for risk assets and interest-rate-sensitive equities.
Wolfe’s analysis highlights the broader fiscal backdrop, with U.S. federal debt remaining at record highs and deficits holding near prior-year levels, signaling an unsustainable long-term trajectory. The firm warns that elevated long-term borrowing costs could pressure capital expenditures by large technology firms, particularly those in AI, which have increasingly relied on fixed-income markets to finance expansion.
Companies with high leverage filters—defined as net debt-to-EBITDA in the top sector quintile or above 3.5x with 30% of debt maturing within a year—are seen as most vulnerable. Historical data referenced by Wolfe shows strong performance for high-leverage stocks in its ProPicks AI model, including Siemens Energy at +231.5% and Sandisk at +189%, though the firm cautions that rising yields could erode these gains.
Investors are awaiting key events this week, including Nvidia’s earnings report after market close on Wednesday and the July PCE inflation data. Fed President Kevin Warsh is scheduled to speak at the Jackson Hole Economic Policy Symposium on Friday, hosted by the Federal Reserve Bank of Kansas City.
