Bond market shifts as rising Treasury yields signal end of 40-year bull era

The bond market is undergoing a structural shift as the 40-year bull market in bonds concludes. Rising yields are being driven by a normalization of real interest rates rather than accelerating inflation. The 10-year Treasury yield recently reached 4.97%, while the 30-year yield surpassed 5.34%, levels not seen in nearly two decades.

Analysts from firms including Franklin Templeton, BMO, and Hoisington suggest this movement is a recalibration of the cost of capital. This shift is fueled by a $350 trillion global debt overhang, persistent fiscal deficits, and significant capital expenditures related to artificial intelligence.

In the United States, the national debt has crossed the $40 trillion threshold, resulting in annual interest payments exceeding $1 trillion. This fiscal pressure is impacting the broader economy, with the 30-year mortgage average reaching 6.7%. The rising cost of debt is creating volatility in the banking system and increasing the financial burden on both the government and individual consumers.