10-Year Treasury Yield Hits Highest Under Trump Second Term

The 10-year U.S. Treasury yield, one of the most important benchmark interest rates in the global financial system, surged to 4.699 percent on July 23 — briefly touching 4.7 percent — marking its highest level since President Donald Trump began his second term in January 2025. The spike, driven by a resurgent oil market and escalating geopolitical tensions, signals mounting concerns over inflation, fiscal deficits, and the economic toll of the ongoing war with Iran, as The New York Times reported.

The Yield Surge in Numbers

The jump in the 10-year note was part of a broad sell-off across the Treasury market. The yield on the 2-year Treasury note, which is more sensitive to Federal Reserve policy expectations, rose to 4.353 percent, while the 30-year Treasury bond yield surged to 5.167 percent — its highest level since 2007, just before the Great Financial Crisis, according to CNBC.

The 10-year yield had fallen below 4 percent earlier in 2026, touching its lowest point of Trump’s second term on February 27 — the day before the United States and Israel launched military strikes against Iran. The subsequent war reversed that decline, with yields now more than 70 basis points above their pre-conflict trough.

Oil Prices Rekindle Inflation Fears

The primary catalyst for the latest yield surge has been a sharp rebound in energy prices. Brent crude futures gained 7 percent to close at $100.69 per barrel on July 23, the highest since before the U.S. and Iran reached a tentative peace deal last month. U.S. West Texas Intermediate crude rose 6 percent to $92.19 per barrel.

Reports of Houthi rebel attacks on tankers off the Red Sea coast of Saudi Arabia, combined with renewed U.S. threats to escalate strikes against Iran, have sent geopolitical tensions spiraling, per CNBC. The 10-year government bond has shown a high correlation to oil prices since the war began, according to Business Insider.

“Yields in the Treasury market aren’t going to go down unless oil does,” said Art Hogan, chief market strategist at B. Riley Wealth Management, describing levels above 4.5 percent as the “danger zone” for bonds. “It’s oil,” echoed Scott Buchta, head of fixed income strategy at Brean Capital, adding that “oil back at $100 is certainly not bond-friendly.”

War Spending and Deficit Concerns

Beyond oil, investors are also reacting to growing concerns about U.S. fiscal deficits. Defense Secretary Pete Hegseth testified at a Senate hearing on July 21 that the cost of the Iran war so far stands at approximately $37.5 billion, with the Defense Department seeking an additional $67 billion in funding. Bond investors sometimes stage sell-offs in government debt to signal dissatisfaction with fiscal policies, demanding higher yields for the risk of holding Treasuries amid widening deficits.

“The deficit story is not new and it continues to get worse,” Hogan told Business Insider, though he noted that inflation remained the predominant driver of the current sell-off.

Mortgage Rates and Consumer Impact

The rise in Treasury yields has already begun filtering through to consumers. The average 30-year U.S. mortgage rate climbed to 6.58 percent this week, the highest level in nearly a year, according to Freddie Mac data reported by KATC and the Associated Press. That is up from 3.97 percent in late February, before the Iran war began. Higher mortgage rates add hundreds of dollars a month in costs for borrowers, further straining a housing market already grappling with record-high home prices.

Fed Rate Hike Expectations Surge

The bond market turmoil has dramatically shifted expectations for Federal Reserve policy. Fed funds futures traders are now pricing in a more than 80 percent probability that the central bank will raise interest rates at its September 2026 meeting — a sharp jump from 52 percent just one week earlier, CNBC reported, citing the CME FedWatch tool.

“Half of Federal Reserve officials are concerned enough about the inflation risks to pencil in a rate hike this year,” said Chris Rupkey, chief economist at FWDBONDS, “but they still need to keep an eye out for labor market risks where jobs are increasingly hard to get especially for recent graduates.”

Market Fallout

Equity markets felt the sting of rising rates. On July 23, the S&P 500 fell 1.21 percent to 7,408.15, the Dow Jones Industrial Average dropped 0.97 percent (down 507 points) to 51,711.29, and the Nasdaq 100 slid 1.87 percent to 28,454.81.

Strategists on JPMorgan’s market intelligence team warned that “bond yields are approaching a level that forces an equity pullback, where that view may be a race to see whether Trump pivots” on economic policy.

Broader Context: The Iran War Factor

The U.S. and Israel have been at war with Iran and its regional allies since February 28, 2026, when U.S.–Israeli airstrikes killed several Iranian officials, including Supreme Leader Ali Khamenei, as the Wikipedia entry on the conflict details. A tentative peace deal reached in June briefly calmed markets, but the collapse of that truce has reignited inflationary pressures. Meanwhile, President Trump’s expansion of tariff policies — including new 50 percent tariffs on Canadian imports announced under Section 338 of the Tariff Act — has added further uncertainty to the economic outlook.

What to Watch

Several key questions loom over the months ahead. Will the Federal Reserve follow through with a rate hike in September, or will softening economic data stay its hand? How long will oil prices remain above $100 a barrel? And will the Trump administration pivot on trade or tariff policy in response to rising bond yields and stock market declines?

For now, the bond market is sending a clear signal: the era of low interest rates and tame inflation is firmly in the rearview mirror, and the intersection of war, trade policy, and fiscal spending is creating a volatile new normal for the U.S. economy.