The 10-year Treasury yield climbed to 5.23% on Friday, its highest level since 2007, CNBC reports. Sticky inflation is part of the explanation. But a flood of new bonds from the federal government and from companies borrowing to build artificial intelligence infrastructure may be a bigger one, according to Macquarie’s Thierry Wizman.

The climb was quick. Earlier in September, reports say, the benchmark was trading just below 4.8%. Bond yields and prices move in opposite directions, and the 10-year yield is a reference point that influences mortgage rates.

The inflation and Fed piece

Inflation worries are one reason yields are rising. The University of Michigan’s consumer sentiment survey showed year-ahead inflation expectations rising to 4.6% in September from 4% in August, the highest reading since June. That is a survey of consumers’ expectations, not a measure of actual price changes.

Markets are also pricing in a possible policy move. According to the CME FedWatch tool, fed funds futures showed a 64% likelihood of a rate hike in October, CNBC reports. That is a market probability, not a Federal Reserve decision.

The supply piece

Wizman argues those factors tell only part of the story. “I think this year it has more to do with the bond issuance than the inflation story,” he told CNBC.

The logic is about supply. The federal government is issuing debt to finance a large deficit, while companies borrow heavily to fund AI infrastructure. Together, Wizman said, that has raised bond supply enough to put upward pressure on yields.

Vanguard estimates that Alphabet, Amazon, Meta Platforms, Microsoft and Oracle issued about $132 billion of debt through July. That compares with an annual average of roughly $35 billion from 2020 through 2024. Vanguard also estimates that broader AI-related debt issuance, spanning data centers, semiconductors and utilities, could reach $300 billion to $570 billion this year. Each new corporate bond competes with Treasuries for investors’ money.

Wizman also said yields at these levels are not unusual on their own, because they are not accompanied by extreme inflation expectations or an aggressively tightening Fed. “The thing that’s abnormal is that we’re in the midst of a very strong investment cycle,” he said. He expects capital spending by AI hyperscalers and their suppliers to keep bond issuance elevated through this year and into next, and said, “these yields could go higher.” That is his forecast, not a certainty.

A global backdrop

In remarks reported by CNBC on Oct. 7, International Monetary Fund Managing Director Kristalina Georgieva put the U.S. move in a wider frame. Bond yields in the U.S., Germany and Japan have surged to their highest levels in decades, she said. She called the AI building boom inflationary, along with energy and food shocks, tariffs and defense spending. CNBC reports that oil prices have stayed above $100 per barrel as the Middle East conflict has dragged on.

Georgieva also said long-term bond issuance by AI-related borrowers competes with governments for capital, though part of the rise in yields may reflect expectations of faster growth. That caveat matters: higher yields can signal optimism as well as strain.

On public finances, she said global public debt is near its highest level since World War II and on track to exceed 100% of GDP. For 17 years, she said, governments had an easy ride because interest rates stayed below growth rates, and “higher interest rates now put an end to that.”

What it means for households

The 10-year yield is a market rate, not a bill that arrives in the mail. It influences mortgages, so people shopping for a home loan or refinance may see pricing shift as yields move. Lenders set their own rates, and the sources do not say how much any given loan would change. A fixed-rate mortgage already in place does not reset when yields rise.

Higher yields can also weigh on stocks by raising companies’ borrowing costs and making bonds look more attractive to income-seeking investors. IMF chief Georgieva warned that heavy hyperscaler borrowing could turn disappointing earnings into a wider shock.

Three things are worth watching: whether bond issuance stays heavy, whether the Fed acts in October, and whether inflation expectations keep rising. Mortgage professionals and real estate agents can use the yield as one input when talking with clients about timing and affordability, alongside each borrower’s own circumstances.

For education and information only. This report does not provide personalized financial, investment, tax, or legal advice.