US Treasury Bonds Suffer Worst Quarterly Performance Since 1994 as Yields Surge

US Treasury bonds have entered the fourth quarter under renewed pressure after recording their sharpest quarterly rise in yields since 1994, as investors increasingly expect higher interest rates to persist.

The benchmark 10-year Treasury yield climbed to about 5.31% on Thursday, while the 30-year yield moved above 5.65%, both reaching levels not seen in years. The 10-year yield increased by 87.1 basis points during the July-September quarter, marking its biggest quarterly rise since 1994.

The sell-off has spread across major global bond markets, with government borrowing costs in France, Britain and Japan also reaching multi-year or multi-decade highs. Britain’s 30-year borrowing cost crossed 6%, while France’s 10-year yield approached 5%.

Rising energy prices have added to inflation concerns, while heavy government borrowing and expectations of stronger economic growth from the artificial intelligence and data-centre investment boom have contributed to higher rate expectations.

Higher bond yields increase borrowing costs for governments, companies and households and can place additional pressure on equity markets.

Investors are now reassessing expectations for US monetary policy, with markets pricing in further Federal Reserve rate increases through mid-2027. The developments have increased scrutiny of government debt levels and the ability of markets to absorb continued borrowing.