--- title: "When Will the Plunge in U.S. Treasuries End?" type: "News" locale: "en" url: "https://longbridge.com/en/news/296189784.md" description: "Affected by weakening U.S. economic data and cooling expectations for rate hikes, the U.S. Treasury market has diverged: short-end rates are declining, but long-end yields continue to climb due to supply pressures from widening fiscal deficits and surging financing demand in the AI industry chain. The 10-Year Treasury Yield and 30-year Treasury yields have hit recent highs. The outcome of the upcoming U.S. midterm elections will be a key variable influencing the fiscal path and the trend of long-term bonds" datetime: "2026-08-18T07:22:27.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296189784.md) - [en](https://longbridge.com/en/news/296189784.md) - [zh-HK](https://longbridge.com/zh-HK/news/296189784.md) --- # When Will the Plunge in U.S. Treasuries End? Recently, U.S. economic data has continued to weaken: July retail sales fell 0.6% month-on-month, significantly lower than the market expectation of a 0.1% rise. Coupled with weaker non-farm payroll and inflation data, multiple economic indicators continue to cool. The market has lowered its expectations for Federal Reserve rate hikes, with the probability of a hike in September falling to around 30%. The steepening of the yield curve continues to intensify: short-term U.S. Treasury rates are declining, but the 10-Year Treasury Yield has broken through 4.7%, and the 30-year U.S. Treasury yield has reached a twenty-year high of 5.3%. With the economy weakening and expectations for rate hikes cooling, why are long-term bond yields struggling to fall? What is the U.S. Treasury market actually pricing in? **一、Why Long-Term Bond Yields Cannot Fall: Supply Pressures Keep Pushing Up Term Premiums** **1\. Fiscal Debt Issuance and Deficit Concerns:** The U.S. fiscal deficit reached a record $432 billion in July, pushing the total volume of U.S. Treasury debt close to $40 trillion. Last week, the Congressional Budget Office (CBO) raised its deficit forecast for fiscal year 2026 from the $1.9 trillion estimated in February to $2.1 trillion, mainly because Supreme Court rulings led to tariff revenues falling significantly short of previous estimates. **Increased U.S. debt pressure has made buyers of U.S. Treasuries more sensitive to prices, pushing up term premiums.** Data released by the U.S. Department of the Treasury on Monday showed that foreign holdings of U.S. Treasuries declined in June, with Japan and China making the largest reductions. **2\. Surge in Financing Demand for Bond Issuance in the AI Industry Chain:** Companies such as Amazon, Alphabet, NVIDIA, and AMD have intensively launched large-scale, long-duration Dollar Bonds to fund capital expenditures for data centers and computing power infrastructure. As of early August 2026, the annual issuance of Dollar Bonds by top U.S. cloud and AI tech giants has exceeded $220 billion. Recently, NVIDIA also secured a $500 billion financing cooperation agreement, further **exacerbating market concerns about the supply of long-duration assets. Bond investors are beginning to guard against the impact of these potential contingent liabilities materializing in the future.** **二、Key Future Timeline: November Midterm Elections** Looking ahead, the **U.S. midterm elections on November 3, 2026**, will be a core variable affecting the U.S. fiscal path and, consequently, the trend of long-term bonds. The market generally expects the Republican Party to likely retain control of the Senate, but the control of the House of Representatives is full of uncertainties: the Democratic Party needs only a net gain of 3 seats to secure a majority in the House. From current market pricing, **a divided government is a high-probability scenario. In this situation, upward pressure on long-end yields is expected to ease, and the U.S. Treasury yield curve may flatten.** **三、Summary** 1、In the short term, fiscal supply and financing by AI companies are the two major pressures keeping long-term U.S. Treasury yields at high levels. 2\. If the midterm elections result in a divided Congress, fiscal expectations will marginally ease, and the cost-performance ratio of going long on long-term bonds is currently becoming apparent. Risk Warning and Disclaimer The market carries risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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