A brief post-election rally in US government debt collapsed this week, with short-dated yields posting their sharpest weekly climb in more than two years as sticky inflation and a chorus of hawkish Federal Reserve commentary forced investors to abandon bets that the year’s bond rout was over.
Two-year Treasury yields jumped 35 basis points over the five sessions, the biggest such move since March 2023, while the benchmark 10-year yield broke through 5.00% for the first time since late October and settled at 5.14%, up almost 30 basis points. The 30-year yield rose 26 basis points to 5.47%. With the cash market closed on Wednesday for the holiday, the bulk of the repricing came across Tuesday and Thursday, when the 10-year notch was its largest since April 2025.
The reversal came barely a week after Democratic gains in the midterm elections, combined with anxiety over artificial intelligence stocks, sent money flooding into sovereign debt as a haven. That bid evaporated once October consumer price data landed above economists’ forecasts for a third straight month, and Fed officials made clear they were prepared to respond.
Fed Governor Christopher Waller said publicly that he would favor a half-percentage-point increase if inflation momentum holds, a position echoed during the week by Dallas Fed President Lorie Logan and Chicago Fed President Austan Goolsbee. Futures markets now fully price a December rate increase.
| Asset | Level | Weekly change |
|---|---|---|
| US Dollar Index | 103.41 | +0.7% |
| 2-year Treasury yield | 4.86% | +35 bps |
| 10-year Treasury yield | 5.14% | +30 bps |
| 30-year Treasury yield | 5.47% | +26 bps |
| 10-year minus 2-year spread | 0.28% | -7 bps |
Note: The 10-year-minus-2-year spread narrowed by 7 basis points as the front end sold off harder, flattening the curve.
The dollar tracked the move in rates. The Dollar Spot Index gained 0.7% for its strongest week since early October, touching its highest level since May 2025 as currency traders priced in a more aggressive policy path.
Long-duration funds absorbed the worst of the damage. The iShares 20+ Year Treasury ETF (TLT) fell more than 3% in its weakest week since April 2025, while the iShares 1-3 Year Treasury ETF (SHY) slipped 0.6%.
The pressure was not confined to the US. Selling spread through international sovereign debt markets, which follow Treasuries as the global benchmark for borrowing costs. A Bloomberg index tracking Treasury returns slid again after the latest yield surge, erasing a recovery that had trimmed the year’s losses to about 1%.
“This is a tougher environment than during the Covid pandemic and the global financial crisis… Those were big directional moves – today it’s about rolling supply shocks and wild rates volatility,” Kellie Wood, a fund manager at Schroders in Sydney who holds short Treasury positions, told Bloomberg. She said investors should stay on guard for higher yields through year-end.
Others see the selloff extending further. Tracy Chen, a portfolio manager at Brandywine Global Investment Management, said the developed-market sovereign debt rout is far from finished and that the main drivers remain intact. She pointed to 5.5% as the next target for the 10-year yield before another period of consolidation.
For some, the climb has created an entry point. George Boubouras, managing director and head of research, investments and advisory at hedge fund K2 Asset Management, described 10-year yields around 5.3% as highly attractive and argued the recent rebound was no flash in the pan. “We’re buying at 5.3% and will keep buying until it hits new highs,” he said.
Adding to the upward pressure is heavy government debt supply, which analysts say is compounding the effect of rate expectations. The combination has revived doubts about Treasuries’ traditional role as a safe haven, particularly after selling continued even as the AI turmoil rattled equities and risk appetite.
The stakes extend well beyond the bond market. Treasury yields anchor borrowing costs worldwide, and the renewed climb is drawing fresh scrutiny from companies that have been expanding fundraising through open markets or institutional-grade loans, many of them technology firms.
For investors, the week’s message was that the post-election haven trade was premature. With the December Fed meeting now seen as a near-certain hike and inflation forecasts still being revised higher, positioning for a sustained drop in yields looks increasingly difficult – a shift that keeps the dollar supported and puts duration-heavy portfolios on the defensive heading into year-end.