10-Year Treasury Yield Nears 4.75% as Bond Selloff Intensifies

Yields reach a 20-month peak

The yield on the 10-year U.S. Treasury note climbed to 4.796% on September 2, its highest since January 2025, before settling near 4.75% in subsequent sessions. The move extended a global bond selloff that saw Japan's 10-year yield reach its highest since August 1996 and Germany's 10-year bund yield climb to its highest point since 2011. The benchmark yield had already touched a 19-month high on Monday before rising further as geopolitical tensions escalated.

MRA Advisory Group highlighted in its September outlook that long-term Treasury yields are elevated and increasingly competitive with equities, raising the opportunity cost of holding stocks at current valuations. At 4.75%, the 10-year offers meaningfully more income than it did during the zero-rate era, but the speed of the recent rise—not the absolute level—is what has unsettled equity markets.

What is driving the selloff

Three forces converged to push yields higher. First, Fed Chair Kevin Warsh's hawkish Jackson Hole speech shifted expectations toward a September rate hike, with CME FedWatch showing roughly 68% odds of a quarter-point increase. Second, the July PCE report showed headline inflation at 3.7% and core at 3.3%, confirming that price pressures remain above target. Third, renewed U.S.–Iran hostilities pushed oil above $90 per barrel, reviving concerns that energy costs will keep inflation elevated.

The combination produced an unusual pattern: falling stocks alongside rising yields. In a typical growth scare, investors flee to the safety of Treasuries, pushing yields down. When both asset classes sell off together, the market is signalling stagflation-style worry—inflation persistence combined with growth concerns—rather than a simple risk-off move into bonds.

Implications for borrowers and valuations

Higher long-term yields raise borrowing costs across the economy. Mortgage rates, corporate bond yields, and municipal financing all track the 10-year benchmark with varying spreads. The U.S. Treasury must also fund a substantial fiscal deficit at these higher rates, which increases the government's interest expense and adds to the supply of bonds the market must absorb.

For equity valuations, the 10-year yield serves as the risk-free rate in discounted cash flow models. Each basis-point increase in the yield reduces the present value of future corporate earnings, with the effect most pronounced for growth companies whose profits are weighted toward distant years. This mechanism explains why the Nasdaq and Russell 2000 underperformed the broader market during the early-September selloff.

Outlook for the rest of September

Whether yields stabilise or continue climbing will depend on the August employment report on September 5 and the August CPI on September 10. Strong data on either front would reinforce the case for a Fed hike and could push the 10-year toward 4.85–4.90%. Softer readings, combined with a de-escalation in the Middle East, could allow yields to retreat toward the 4.50–4.60% range that prevailed before Jackson Hole.

MRA Advisory noted that the market enters September with less room for disappointment on the inflation front. For portfolio construction, the elevated yield environment favours a disciplined approach to duration management, with shorter-maturity bonds offering less sensitivity to further rate increases while still providing competitive income relative to recent years.