Treasury yields settle around 5% across the curve

Bloomberg's 53% works out to about 92 of the 173 specialists it surveyed ^[5][1]. For that group to be right, the 30-year has to add roughly another 50 basis points to the 5.501% it touched on the 24th ^[3][2]. A 6% print would be the first since 2000 ^[6].

The immediate trigger was a surge in oil prices after renewed U.S.-Iran tensions ^[10]. If that eases, some of the move could go with it. The slower forces cited alongside oil are demand for capital to fund AI investment, the federal budget deficit and the Fed's tightening stance ^[10]. If those dominate, yields stay near 5% after oil calms. The overshoot case, a 30-year above 6%, is the one Karen Ward of J.P. Morgan Asset Management argues against: she said it was unlikely the 10-year would rise much above 5% ^[15].

The slower forces come with figures. A New York Fed model puts the real neutral rate at 1.65% in the second quarter of this year, up from 1.36% in the first quarter of last year ^[13], a rise of 29 basis points ^[3]. When the neutral rate rises, policy rates tend to follow ^[14]. The Wall Street Journal, citing an estimate by economist Stijn Van Nieuwerburgh released by the Brookings Institution, reported that $10.3 trillion is expected to go into U.S. data centers and AI infrastructure between 2025 and 2032 ^[12]. Spread over eight years, that comes to roughly $1.3 trillion a year ^[4]. The move reaches beyond the U.S. as well. Bloomberg's global aggregate government bond index puts the average sovereign yield at 4.04%, the highest since 2000 ^[11].

The overshoot case also turns on who owns the bonds. China's June holdings were down 4% on the month and more than 13% on the year ^[7], so roughly $95 billion or more has come off its book in twelve months ^[8]. The holders gaining share are hedge funds, investors sensitive to short-term returns, in a market that governments and institutions once dominated ^[9]. I'd expect a long end held more by those funds to move further and faster on each piece of news.

John Williams, the New York Fed president who has struck an accommodative tone, said at Oxford on the 25th that policymakers cannot ignore persistent supply shocks keeping price pressures elevated as tariffs and energy costs rise ^[16]. I think the evidence supports budgeting on a 10-year around 5% as the base case. It trades around 5.10%, 12 basis points under its peak ^[2][6], and the neutral-rate estimate has risen. A 6% 30-year belongs in the stress case, with a slim majority behind it. A capital plan that assumes refinancing at lower rates within the year is a bet that the oil trigger fades and the slower forces fade with it. The 5% base case is wrong if oil calms and the 10-year settles well below 5% while the New York Fed's neutral estimate stops rising.