U.S. long-term government bond yields hit a nearly three-month high, with inflation expectations weighing heavily on the bond market

U.S. 30-year Treasury bond prices continue to decline, with yields recently hitting the highest level since mid-September. Data shows that the 30-year obligacji yield reached 4.86%, the highest since September 5th, rising about 6 basis points this week. In contrast, the 2-year Treasury yield remains largely unchanged, even slightly declining during the week.

Long-term and short-term bond spread reflects policy divergence

The market exhibits a typical “steepening yield curve” characteristic. The resilience of short-term Treasury yields mainly stems from traders’ expectations of continued rate cuts by the Federal Reserve next year—market participants generally believe the Fed may implement two 25 basis point rate cuts before the end of 2026. However, upward pressure on long-term obligacji comes from another direction: ongoing concerns about inflation are pushing bond prices down and yields up.

Federal Reserve officials turn hawkish

Chicago Fed President Goolsbee and Kansas City Fed President Schmid spoke this Friday, both expressing cautious attitudes toward inflation and clearly opposing further rate cuts, leaning toward maintaining the current policy stance. This hawkish stance on “anti-inflation” marks a reassessment within the Federal Reserve regarding the policy direction.

Bond investors face dual risks

Strategist Edward Harrison warned that, given officials like Goolsbee are increasingly concerned about inflation, U.S. long-term obligacji are at risk of valuation declines. Amid expectations of rate cuts and inflation worries hedging each other, the outlook for the bond market becomes more complex: short-term bonds may benefit from the rate cut cycle, but long-term yields face ongoing upward pressure, which could negatively impact total returns for bondholders.