Five Percent Is Back
Why Today’s Bond Market Deserves a Fresh Look
For most of the past fifteen years, bonds have been an awkward conversation. Yields were too low to fund a retirement, and the old refrain that “there is no alternative” to stocks pushed many portfolios further into equities than their owners realized. That conversation has changed, and quickly.
The yield on the 10-year Treasury note reached 5.23% during trading on Friday, September 25, its highest level since June 2007, while the 30-year yield reached its highest level since 2004.2 The speed matters as much as the level. Two weeks earlier the 10-year was below 4.8%, and at one point in August it was below 4.6%.2
I’ve watched a few of these moments up close: as a bond trader during the dot-com era, as a portfolio manager through 2008, and as a Chief Investment Officer during the 2022 rate shock. Moves like this are uncomfortable when you own bonds. They can be valuable if you’re about to buy them. Two forces are behind this one, and understanding both helps explain why we see an opportunity rather than only a threat.
By the Numbers
- 5.17%
- 10-year Treasury yield (close, Sept. 25)
- 5.23%
- 10-year Treasury yield (intraday high, Sept. 25)
- 4.81%
- 2-year Treasury yield (close, Sept. 25)
- 2.653%
- 10-year TIPS real yield (Sept. 17 auction)
- 3.4%
- CPI, year over year (August)
- 2.4%
- Core CPI, year over year (August)
- 3.75%–4.00%
- Federal funds target range
- ~$220 billion
- Hyperscaler bond issuance, 2026 through Aug. 10
Data as of dates shown. Sources: 1, 2, 5, 7, 8, 10.
Force One: The Iran War and the Return of Inflation
Inflation, which had been approaching 2% at the start of the year, reignited after the Iran war drove up global oil prices.3 Oil has been volatile since the conflict began in late February,4 and Brent crude has again traded above $100 a barrel this month amid ongoing tensions around the Strait of Hormuz.5
The effect shows up at the pump and in the data. Gasoline prices were up 27.4% from a year earlier in August, and the Consumer Price Index rose 3.4% year over year, unchanged from July.5 Expectations are drifting higher too: the University of Michigan’s measure of year-ahead inflation expectations rose to 4.6% in September from 4.0% in August.6
The Federal Reserve has responded. On September 16, the Fed raised its benchmark rate by 25 basis points to a target range of 3.75%–4.00%, its first increase since 2023 and the first under Chair Kevin Warsh. Sixteen of the eighteen participants projected at least one more increase this year.7
One detail is worth pausing on. Core inflation, which excludes food and energy, is considerably tamer than the headline figure: core CPI was up 2.4% year over year in August.5 In other words, much of today’s inflation reflects an energy shock tied to a geopolitical event. Energy shocks can persist, but they can also reverse, and in our view bond investors who lock in yields while that shock is priced in may benefit if it fades.
Force Two: The Hyperscaler Borrowing Boom
The second force is newer and, in our view, underappreciated. The largest technology companies, long known for funding themselves out of enormous cash flows, have become some of the biggest borrowers in the world to finance the buildout of artificial intelligence infrastructure.
Alphabet, Amazon, Meta, Microsoft and Oracle issued about $220 billion of bonds in 2026 through August 10, as they finance an AI infrastructure buildout expected to require roughly $750 billion of capital spending this year.8 For context, gross hyperscaler bond issuance was about $17 billion in 2024 and $109 billion in 2025.9 With capital spending plans still climbing, we see little reason to expect that supply to slow soon.
All that supply has to be absorbed, and investors are demanding more to take it. Median spreads for two- to four-year hyperscaler bonds rose to 40 basis points over comparable Treasurys from 30 in 2025, five- to seven-year spreads rose to 60 from 50, and spreads on bonds maturing beyond 20 years reached 118 from 108.5.8 And the effect isn’t limited to tech. Heavy borrowing by both the federal government and corporations is adding to the overall supply of bonds, which puts upward pressure on yields across the market.
Put simply, the AI boom is competing with everyone else for the same pool of lending capital, and that competition is lifting what lenders get paid.
Why We See Opportunity, Particularly Near Retirement
Higher yields are painful for existing bondholders, but they reset the terms for new money. A few things stand out to us.
Real yields are the highest in a generation.
Treasury Inflation-Protected Securities (TIPS) allow an investor to lock in a return above inflation if held to maturity. This month’s 10-year TIPS reopening auction produced a real yield of 2.653%, the highest for that maturity in nearly 18 years.10 For a retiree whose largest long-term risk is losing purchasing power, a government-backed return of more than 2.5% above inflation for a decade is a meaningful tool.
The cushion against further rate increases is thicker.
At a yield above 5%, a 10-year Treasury’s income can absorb a rise in yields of roughly 65 basis points over a year before its total return turns negative.* At the 1.5% yields of a few years ago, that cushion was a fraction of that size.
Equity leadership has narrowed.
September’s S&P 500 gains have been driven largely by the “Magnificent Seven,” while other large companies and small caps have lagged.11 Many portfolios have become more concentrated in a handful of AI-linked companies without anyone deciding that on purpose. Rebalancing a portion of equity gains into bonds yielding around 5% is one way to reduce that concentration.
Retirement changes the math.
In the accumulation years, volatility is an inconvenience and can even be an opportunity. Once withdrawals begin, a large market decline early in retirement can do lasting damage, because assets may need to be sold at depressed prices to fund spending. Matching several years of expected withdrawals with high-quality bonds that mature when the money is needed can help reduce that risk, and today’s yields make that approach far more affordable than it has been in a long time.
What Could Go Wrong
We want to be clear about the risks, because this is not a one-way trade.
Yields could keep rising.
The 10-year has moved sharply in a matter of weeks, and there is no guarantee it has peaked. If the conflict escalates or inflation broadens beyond energy, bond prices could fall further before they recover.
Corporate credit deserves selectivity.
Hyperscaler debt remains investment grade, but ratings range from Microsoft’s AAA to Oracle’s BBB with a negative outlook.8 These are not interchangeable credits, and the heaviest spread pressure has been in the longest maturities. There is also a concentration issue many investors miss: an investor who owns these companies’ stocks and their bonds is making the same bet on AI spending paying off twice.
Bonds and stocks don’t always offset each other.
In inflation-driven selloffs, as in 2022, both can fall together. That is one reason we favor a mix that includes TIPS and a disciplined approach to maturity, rather than simply reaching for the longest bonds available.
How We’re Thinking About It
For clients approaching or already in retirement, we believe the current environment is a legitimate opportunity to shift from an equity-heavy posture toward a greater role for high-quality fixed income. In practice, that might mean building a ladder of Treasuries, TIPS, high-grade corporate bonds and, for taxable accounts, municipal bonds, sized to help cover several years of planned spending. Given how quickly yields are moving, we generally favor adding exposure in stages rather than all at once.
Every situation is different, and the right mix depends on your income needs, tax picture, and comfort with volatility. If you’d like to talk through what this could look like for your portfolio, Bill and I would welcome the conversation.
Brian Kinney
Co-Founder, KinneyMunro Wealth Advisors
* See “Hypothetical illustration” under Important Disclosures for assumptions and limitations.
Sources
- Advisor Perspectives, “Treasury Yields Snapshot: September 25, 2026.” https://www.advisorperspectives.com/dshort/updates/2026/09/25/treasury-yields-snapshot-september-25-2026
- CNBC, “Dow jumps more than 470 points Friday; stocks notch winning week despite Treasury yield surge,” Sept. 2026. https://www.cnbc.com/2026/09/24/stock-market-today-live-updates.html
- CBS News, “Why the bond market is freaking out, and what it means for your money,” Sept. 2026. https://www.cbsnews.com/news/bond-market-treasury-yields-inflation-fed/
- NBC News, “Inflation ticked up in August, setting the stage for the Fed to hike interest rates,” Sept. 2026. https://www.nbcnews.com/business/economy/august-inflation-interest-rates-affordability-rcna597095
- CBS News, “Inflation stayed hot in August with annual pace of 3.4%, raising the odds of a Fed hike,” Sept. 11, 2026 (citing U.S. Bureau of Labor Statistics data). https://www.cbsnews.com/news/august-cpi-report-inflation-fed-rates/
- CNBC, “The 10-year Treasury yield is at its highest in nearly two decades. How we got here,” Sept. 26, 2026 (citing University of Michigan Surveys of Consumers). https://www.cnbc.com/2026/09/26/10-year-treasury-yield-is-at-its-highest-in-19-years-how-we-got-here.html
- Quartz, “The Fed hikes interest rates for the first time in years,” Sept. 16, 2026 (citing the FOMC statement and Summary of Economic Projections). https://qz.com/federal-reserve-interest-rate-hike-inflation-091626
- MLQ.ai, “Hyperscaler bond issuance reaches about $220 billion as AI financing costs rise,” Aug. 2026 (citing Reuters, BNP Paribas data and S&P Global Ratings). https://mlq.ai/news/hyperscaler-bond-issuance-reaches-about-220-billion-as-ai-financing-costs-rise/
- NAI500, “AI Hyperscalers Turn to Debt as Bond Spreads Widen,” Sept. 2026 (citing J.P. Morgan Asset Management issuance data). https://nai500.com/blog/2026/09/ai-hyperscalers-turn-to-debt-as-bond-spreads-widen/
- Tipswatch, “10-year TIPS reopening gets real yield of 2.653%, highest in nearly 18 years,” Sept. 17, 2026 (citing U.S. Treasury auction results). https://tipswatch.com/2026/09/17/10-year-tips-reopening-gets-real-yield-of-2-653-highest-in-nearly-18-years/
- Yahoo Finance, “10-Year Yield Tops 5%, Mag 7 Lead Stocks, Oil Price Uncertainty: 3 Charts To Watch This Week,” Sept. 28, 2026. https://finance.yahoo.com/markets/stocks/articles/10-yield-tops-5-mag-105935901.html
Authors
Important Disclosures
General information only. This commentary is provided by KinneyMunro Wealth Advisors for informational and educational purposes only. It does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security, strategy, or investment product, and it is not individualized investment, tax, or legal advice. The appropriateness of any strategy depends on an investor’s specific objectives, financial situation, time horizon, tax circumstances, and risk tolerance. Please consult your advisor before making any investment decision, and consult a qualified tax or legal professional regarding your individual circumstances.
Opinions and forward-looking statements. Views expressed are those of the author as of the date of publication and are subject to change without notice. Statements regarding future market conditions, interest rates, inflation, or economic events are opinions, not guarantees, and actual results may differ materially.
Third-party information. Market data and other information are obtained from third-party sources believed to be reliable, but their accuracy and completeness are not guaranteed. Market data is as of September 25, 2026 unless otherwise noted and may have changed materially since that date.
Hypothetical illustration. The “roughly 65 basis point” income cushion described in this commentary is a hypothetical calculation that assumes a 10-year U.S. Treasury note purchased at par with a yield of approximately 5.17%, a modified duration of approximately 7.8, and a one-year holding period. It ignores changes in the shape of the yield curve, convexity, reinvestment, taxes, and transaction costs. It is provided for illustrative purposes only, does not represent the performance of any actual investment or client account, and should not be relied upon as an indication of future results.
Fixed income risks. Bonds are subject to interest rate risk; bond prices generally fall as interest rates rise, and longer-maturity bonds are typically more sensitive to rate changes. Bonds are also subject to credit and default risk, inflation risk, liquidity risk, call risk, and reinvestment risk. Corporate bonds carry greater credit risk than U.S. Treasury securities, and credit ratings are opinions of the rating agencies that may change. U.S. Treasury securities are backed by the full faith and credit of the U.S. government as to timely payment of principal and interest but are subject to market price fluctuation if sold before maturity.
TIPS. Treasury Inflation-Protected Securities adjust principal based on changes in the Consumer Price Index. Their market value may decline in periods of low or negative inflation or rising real yields, and inflation adjustments to principal are generally taxable in the year they occur even though they are not paid until maturity.
Municipal bonds. Income from municipal bonds may be subject to state and local taxes and, for certain investors, the alternative minimum tax. Capital gains, if any, are subject to tax. Tax-equivalent yield comparisons depend on an investor’s individual tax bracket.
Strategy limitations. Asset allocation, diversification, and bond laddering do not ensure a profit or protect against loss in declining markets. Reallocating from equities to fixed income may reduce a portfolio’s potential for long-term growth, and a reallocation may have tax consequences. Staged or periodic investing does not assure a profit or protect against loss.
Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
Firm information. Investment advisory services offered through Mariner Platform Solutions (MPS), an SEC-registered investment adviser. KinneyMunro Wealth Advisors and MPS are not affiliated entities. For additional information about MPS, including fees and services, please refer to MPS’s Form ADV Part 2A, available at www.adviserinfo.sec.gov. Registration does not imply a certain level of skill or training.