Macro Notes - The Problems in the Long End
August 18, 2026
Much has been made of the pressure in the long end of the yield curve. For instance, US 30-year yields (currently at 5.31%) are probing levels that haven’t been seen in decades. That pressure has also been ‘spilling over’ into other bond markets – eagle eyed market watchers will note that CAD 30-year yields closed yesterday at their highest level since early 2010.
There are several catalysts that many point to behind the move in the extreme long end:
- Concerns on the size of federal deficits (especially in the US and Japan)
- Uncertainty on the Fed’s reaction function
- Rising long-term inflation expectations
- Heavy corporate issuance (largely tied to AI capex)
That last point is worth digging into. There are signs emerging that corporate issuance is “crowding out” current Treasuries – resulting in market indigestion and higher yields in the riskiest parts of the UST curve. For instance, investment grade US companies have sold just over $1.5trln in bonds so far this year – compared to the $2.4trln issued by the US Treasury in notes/bonds. After adjusting for duration, corporate issuance amounts to 42 cents of DV01 for every $1 of Treasury DV01. That’s up from our estimate of 30 cents from years past – implying greater competition for duration demand.
And given the rising capex commitments, this may get far worse before it gets better. Indeed, UST steepeners could remain the curve play for the near-term.
Chart 1 – US IG Corporate Issuance by Year (US$ trlns)
