TS Lombard: U.S. 10-Year Treasury Yield Could Reach 8% Long-Term Target
nashnova research
TS Lombard chief US economist Steven Blitz warns the 10-year Treasury yield's next plateau is 5.75%, with 8% as a multi-year target — meaning today's 5.30% is just a waypoint on a long climb, with sustained pressure ahead for both bonds and equities.
Why does the yield still have further to rise? What is the "original sin"?
Blitz traces the root of this yield cycle to a monetary-policy "original sin" — easing before inflation was fully defeated.
He says Fed Chair Powell "blinked and began easing" late last year, just as corporate profits were rebounding and employment was softening — exactly two months before the 2024 presidential election.
This means → the rate cuts were not a victory lap over inflation but a premature retreat under multiple pressures. Blitz argues the consequences will take years to play out.
Has the rate-transmission mechanism changed? What really constrains the economy now?
Blitz argues the fed funds rate no longer restrains the economy as it once did. The real discipline will come from the long end.
In plain terms = the Fed used to tap the brakes by hiking short rates. That pedal is now loose — only when the 10-year yield rises high enough to "suppress equity performance" will markets truly feel pain.
His explicit call: "Suppression will come."
Why did the 2025 recession "not show up"?
Blitz calls 2025 "the recession that should have happened but didn't": the yield curve was inverted for roughly 22 months, and private non-healthcare payrolls were already declining.
But outsized fiscal expansion, combined with Fed rate cuts timed to a profit rebound, postponed the downturn. Tariff policy added further fuel.
This reflects an economy that is not organically strong but kept alive by a fiscal-and-monetary double dose — at the cost of pushing inflation pressure further out and extending the yield-rise cycle.
Where is inflation heading — is 2026 or 2027 the bigger risk?
Blitz invokes two Wall Street maxims: profits lead employment, employment leads inflation; and inflation is mildest in the first year of a recovery.
His read: 2026 will be a relatively benign year for inflation, but elevated corporate profits mean 2027 hiring will accelerate and underlying inflation will re-intensify.
This means → even if next year's inflation prints look friendly, that does not signal a yield peak — the real inflation pressure lies one year further out.
What signal are excess supply and swap spreads sending?
The structural issue is supply: major developed-market sovereigns face massive debt rollovers, fiscal deficits are expanding faster than nominal GDP, and central banks are no longer the marginal buyer.
This year, mega-cap tech firms alone issued roughly $500 billion in investment-grade bonds — about half the total US Treasury supply measured by DV01 (a gauge of how much a bond's price moves per basis-point shift in rates).
Swap spreads — the gap between the fixed leg of an interest-rate swap and the matching Treasury yield — are Blitz's key market signal: investors keep choosing to receive a floating overnight secured rate rather than hold fixed-coupon sovereign paper. In plain terms = the market is voting with real money — preferring floating rates over locking in sovereign credit — a trend unbroken since 2012.
What does this mean for investors? Is 5.30% the end or just the start?
If Blitz is right, the current 5.30% yield is merely a waypoint. 5.75% is the next plateau; 8% is the multi-year target.
The path will involve "a great deal of back-and-forth volatility" — not a straight-line move, but a grinding, bumpy climb.
This means → the real test arrives not today but at the point where yields are high enough to suppress equity returns. When that threshold is crossed, bonds and stocks will come under pressure simultaneously.
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