US Treasury Yields Hit 2007 Highs; 30Y at 5.5% Pressures Equity Valuations

The US long bond is now in a full bear market. The 30-year Treasury yield has climbed to 5.5%, the highest level since 2007, while the 20-year equivalent touched 5.14%. This repricing reflects a critical shift in market expectations: inflationThe rate at which prices rise across an economy. is no longer transitory, and central banks may hold rates higher for longer. The trigger is two-fold: the Iran conflict pushing crude above $110, and persistent core inflation metrics that remain sticky despite Fed rate holds.

Equity valuations are repricing in real time. High-growth tech stocks, which had benefited from rate-cut narratives, are now facing headwinds as discount rates rise. The Nasdaq 100 fell sharply as investors rotated away from rate-sensitive names, while chipmakers in particular saw a rout on the thesis that AI capex cycles may face slower returns in a higher-rate environment. Goldman Sachs' December 2026 call on the first Fed cut (down from June) is already looking optimistic if long-end rates remain elevated.

Fixed-income investors are also repricing. Distressed corporates, leveraged loans, and mortgage-backed securities face mark-to-market losses as discount rates climb. The G-7, meeting amid this shock, urged fiscal restraint, signalling that policymakers expect the war to slow growth while simultaneously lifting inflationThe rate at which prices rise across an economy., a stagflation scenario that limits monetary accommodation.

One contrarian argument is that a sharp rise in long-dated yields could eventually attract enough demand to cap the selloff; some analysts point to the 5.5% level as a natural support given historical yield patterns. However, if geopolitical tensions persist, commodity inflationThe rate at which prices rise across an economy. stays elevated, and central banks remain hawkish, the 6% handle on 30-year rates is achievable.