Long-Term Interest Rates on the Rise
Yields on 10-year U.S. Treasury bonds continued to march higher in early September. Rates topped 4.9 percent as of September 10, the highest since 2023. Meanwhile, the 30-year Treasury yield climbed to a multi-decade high of 5.3 percent.
This has taken place even as monetary policymakers have held the line on changes to the short-term benchmark rate. Indeed, the Federal Reserve’s federal funds rate target has been steady for nearly a year following an earlier easing cycle. A common misconception is that Fed rate cuts automatically feed through to long-term yields, and vice-versa.
In fact, long-term rates are determined by financial markets’ expectations for inflation, federal debt and deficits, demand for perceived risk-free assets, and the long-run outlook for economic growth. Bond investors are worried about all of the above right now. In particular, the latest surge in oil prices has raised fears that high inflation will persist for some time.
Higher long-term rates affect consumer credit through a variety of channels, but the common theme is that they raise borrowing costs and put pressure on affordability and credit performance.
If long-term rates increase, so do auto and personal loan payments and lender funding costs. At the same time, household financial stress rises, and delinquencies and credit quality become a greater concern.
September 10th, 2026
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