Analysis-No shortage of culprits in panic over long US Treasury yields

Higher long-end Treasury yields are expected to persist due to a combination of supply and demand factors, as well as shifting buyer preferences, according to experts. The surge in rates can be attributed to concerns about inflation, alongside longer-term questions about the market's ability to absorb a large amount of bonds sold by governments and high-quality corporate issuers.

Treasury Secretary Scott Bessent may find it difficult to lower borrowing costs due to structural issues in the bond market, as bond investors become more price-sensitive and question the safety of U.S. Treasuries. The change in the makeup of buyers, with hedge funds and other price-sensitive firms replacing official, longer-term buyers like overseas central banks, has increased the price sensitivity of the market.

Corporate issuers, particularly those involved in AI infrastructure projects, are borrowing heavily, leading to narrower spreads between corporate and Treasury debt. The uncertain picture around inflation, especially due to the unresolved conflict with Iran, further aggravates the situation. Ultimately, achieving lower long-term rates may prove challenging for Bessent and the Treasury Department, as supply and demand issues are beyond their control.