How US Treasury yields are rewriting capital markets

US Treasury yields have hit multi-year highs, with the 30-year yield at 5.63% last Friday, the highest level in 19 years. The 10-year yield is also at a 19-year high at 5.28%, while the 5-year yield has set a new 20-year high at 5.06%.

Several markets are running on Polymarket for all these yields, with the 10-year forecast of reaching 5.4% before 2027 given a chance of 63%. The market is trading at $0.64 for a yes trade, while a no trade is going for $0.38. 

The market has already attracted a volume of over $33k for this particular target, with the 5.5% rate receiving the highest volume at over 164k.  Overall, the market for the U.S. 10-year Treasury yield hitting new multi-year highs before 2027 has attracted nearly $1 million in bets.

What’s driving U.S. Treasury yields higher?

The Federal Funds rate is often a primary catalyst. Every hike often results in higher bank rates. However, this year, there has only been one rate hike so far, which came in September. 

Whilst the funds rate remained flat for most of 2026, expectations for a rate hike have been increasing since April, after the data showed that the U.S. inflation rate spiked from 2.4% in February to 3.3%. 

That spike was followed by two more consecutive spikes in April and May to 3.8% and 4.2%, respectively, at which point it seemed inevitable that the Fed was going to raise interest rates to counteract rising inflation. 

However, a fall to 3.5% in June and 3.4% in July delayed a hike decision, which came two months later, after inflation steadied in August.

The question now is, with the Fed expected to keep interest rates unchanged in October, should investors continue to expect high yields?

This is highly likely, because even though Fed’s Williams stated no urgency for another hike after the September decision, several Fed committee members have indicated at least one more hike may be required before the end of the year. 

This would be enough to trigger a resolution for Polymarket traders targeting a 5.4% yield on the U.S. 1-year Treasury note.

Traditionally, rising Treasury yields would normally put pressure on stocks and other risk-on assets. This time, though, stocks seem to be more resilient as they continue to hit new all-time highs.

Both the S&P 500 Index and the NASDAQ on Tuesday hit new all-time highs of 7,844 and 27,722, respectively, AI-driven capital gains.

It remains to be seen how long capital markets can maintain a positive direct relationship with the U.S. Treasury yields, as the cost of borrowing continues to rise.