U.S. 10-Year Treasury Yield Rises to 5.31%, Hitting 24-Year High
nashnova research
The U.S. 10-year Treasury yield climbed to 5.31%, its highest since 2002. TS Lombard chief economist Steven Blitz warns that 5.75% is just a waypoint — 8% is the real destination — and when it arrives, the buy-the-dip reflex that defined a generation of investing will break.
5.31% is already high — why does someone see 8%?
The 10-year yield posted eight consecutive weekly gains, touching 5.31% this week — the highest since 2002.
Most of Wall Street is debating whether 6% is the next threshold. Blitz argues that framing is "too small" — 5.75% is a staging post; 8% is the long-term target.
This means → If he is right, the current yield level is far from a top, and losses for bondholders are nowhere near over.
Why can't yields come back down?
Blitz traces the root cause to monetary policy's "original sin": cutting rates before inflation was truly defeated.
In plain terms = Former Fed Chair Powell saw the job market cool and cut rates late last year — but corporate profits were already recovering. That is hitting the brake and releasing it at the same time.
The decision fell two months before the 2024 presidential election, effectively handing the Biden administration a political gift.
This reflects a deeper reality: central-bank decisions are not made in a vacuum — political cycles interfere with the rhythm of tightening.
Why didn't the 2025 recession arrive?
The yield curve stayed inverted for roughly 22 months — historically a reliable recession signal — yet no recession materialized.
Blitz's explanation: fiscal expansion was too large, and the Fed began cutting just as corporate profits turned up. Together they blocked the economy's natural adjustment.
This means → The recession did not disappear; it was postponed — and the cost is inflation pressure that becomes harder to digest in the next cycle.
What about that "below-expectations" inflation print — is it really cooling?
August core PCE — the personal-consumption expenditure price index, the Fed's preferred inflation gauge — looked "below expectations" on the surface. The actual reading was 0.247%, rounded down to 0.2%.
More telling: supercore inflation — services prices excluding food, energy, and housing — rose 0.4% month-on-month. The "other services" component hit its largest increase on record; education costs also set a record.
In plain terms = The headline number looked tame; break open the components and everything is running hot. The 10-year yield promptly erased all gains that followed the PCE release.
What signal is the swap spread sending?
The swap spread — a measure of whether investors prefer holding sovereign bonds or receiving floating overnight secured rates — shows a clear trend: more investors would rather take the floating rate than hold Treasuries.
In plain terms = The market is saying: "The risk premium for lending to the government is not enough — I'd rather park my money elsewhere."
This trend began in the U.S. in 2012 and has spread to the U.K., France, and Germany since the pandemic.
This reflects something deeper than rate expectations: the market is pricing fiscal risk — government debt rollovers are outpacing nominal GDP growth, and central banks are no longer the marginal buyer.
What does this mean for ordinary investors?
Blitz does not predict the collapse of any single asset. What he expects to break is a mindset — the conviction that "inflation will return to 2%" and the reflexive logic that "being long stocks and bonds always pays off."
He frames the divide as "Hamilton vs. Jackson": running the economy through the central bank vs. running it through government fiscal policy. Today's populism leans toward Jackson.
The U.S. net savings rate has fallen to zero with "no sign of improvement" — that is the macro backdrop behind his call for an eventual 8% yield.
Goldman Sachs delta-hedging head Rich Privorotsky said this week that the rate move "has become too punishing to ignore," even as "equities have shown impressive resilience." Whether yields stabilize here or press on toward 6% and beyond will be the key test of this thesis.
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