The yield on the 10-year U.S. Treasury note climbed to 4.7 percent this week, reaching the highest level during President Trump’s second term in office. This rise marks a significant increase from the yield below 4 percent observed before the beginning of the conflict involving Iran in late February. The yield was 4.6 percent on the day Trump assumed office in January 2025.

The 10-year Treasury yield is a crucial benchmark that influences borrowing costs across various debt markets, including corporate bonds and mortgage loans. Its recent rise poses challenges to the administration’s goal of maintaining affordable borrowing costs for American businesses and consumers.

One visible impact has been on the housing market. Mortgage rates have increased alongside the Treasury yield, with the average 30-year fixed-rate mortgage reaching 6.58 percent, according to Freddie Mac’s data released on Thursday. This is a marked rise from just under 6 percent in the week prior to U.S.-Israeli strikes in Iran in late February. Economists like Nancy Vanden Houten of Oxford Economics warn that rising rates could suppress already sluggish home sales unless they retreat soon.

Several factors are driving up Treasury yields. Inflation expectations have risen amid surging oil prices. Additionally, long-term rates have been influenced by heightened growth prospects tied to investments in artificial intelligence infrastructure. If economic growth accelerates too rapidly without corresponding rate hikes, there are concerns about overheating and increased inflation.

Global fiscal developments also weigh on yields. Investors are demanding higher returns due to growing government borrowing and deficits worldwide. For example, Britain’s 10-year gilts have increased nearly 0.9 percentage points to over 5 percent since the Iran conflict began, amid scrutiny of new fiscal policies under Prime Minister Andy Burnham. Japan’s 30-year government bonds have also seen a rise of 0.7 percentage points to 2.8 percent alongside substantial government spending.

The surge in bond yields is not isolated to the United States. Analysts highlight that rising yields in multiple countries relate to concerns about government debt sustainability. The U.S. Treasury currently holds nearly $40 trillion in outstanding debt, more than double the amount from a decade ago. Subadra Rajappa, an interest rate strategist at Société Générale, noted the rise “is about domestic debt and deficits” with a similar trend occurring internationally.

Moreover, heavy borrowing by leading technology companies investing in AI infrastructure has pushed other businesses to offer higher interest rates to attract lenders, further contributing to upward pressure on yields.

Treasury Secretary Scott Bessent has previously pointed to the 10-year note as a “barometer” of progress in making borrowing more affordable. However, the recent increase in yields signifies rising costs for both companies and households.

Since touching a low just under 4 percent on February 27 — the day before U.S. and Israeli military actions in Iran — the yield has risen about 0.8 percentage points. While inflation concerns appear somewhat contained, market participants and Federal Reserve officials face ongoing pressure to keep inflation in check. Some warn that a lack of decisive Fed action could sustain inflationary pressures, possibly pushing long-term yields even higher.

Jonathan Hill, an inflation strategist at Barclays, noted that the market anticipates several more years of above-target inflation, underscoring the challenges policymakers face in stabilizing prices amid evolving global and domestic economic conditions.