Commentary by: Chris Edmonds | President, Fixed Income & Data Services, ICE

September is well-established - perhaps even infamous - as the weakest month for equity market performance when analyzing monthly returns over the past 80 years.1 There is no comparable broad body of research into seasonality in fixed income markets, but one analysis of 10-year U.S. Treasury yields between 1991 and 2020 found May to September to be the most bullish period of the year for U.S government bonds, with October through year-end proving more challenging.2

Seasonality aside, there’s little reason to feel bullish about September 2026: as we approach month end, it is looking like one for the fixed income history books. Yields on the 10-year Treasury touched 5.23% on September 24, their highest intraday level since June 2004.3 This came a week after the Federal Open Market Committee (FOMC) voted unanimously to increase the federal funds target rate by 25 basis points to 3.75-4.0%, noting that inflation remains elevated and “the policy action will support a timelier return to the Committee's 2% goal.”4 Not only was this the first Fed rate increase since 2023, it was accompanied by projections of a further quarter-point hike before the end of 2026.5

These twin developments will only intensify anxiety about rising borrowing costs for the United States, which saw its national debt exceed $40 trillion in mid-August,6 further compounding the $1.2 trillion in interest the nation paid on its outstanding debt during fiscal year 2025.7

Amid warnings that a long-feared U.S. debt crisis could be triggered if bond investors demand significantly higher yields to buy Treasuries,8 ICE analysts took a closer look at U.S. borrowing costs relative to four other G7 issuers.

Focusing on 10-year government bond yields for the United States, Japan, Germany, the United Kingdom and France, the analysis compared how bond yields increased for the issuers across five different time horizons throughout 2026:

Figure 1. Percentage change in 10-year government bond yields for U.S., U.K., Germany, Japan and France across five different time horizons in 2026. Source: ICE Indices. Data as of September 24.

Despite concerns over rising U.S. borrowing costs, yields on 10-year Treasuries have climbed more slowly than yields on 10-year debt from other issuers. Japanese government bonds have seen the sharpest increases since the start of the year, with yields climbing more than 45% - almost twice the 23% increase for Treasuries over the same period.

More recently, 10-year French OATs have seen yields climb more sharply than Treasuries of the same maturity. In fact, across three of the five observation periods, U.S. yields climbed at the second-slowest rate of all issuer nations surveyed.

It’s worth cautioning - as I did last July - how much market noise is embedded in government bond yields, so we would be wise not to put too much stock in this kind of apples-to-apples comparison. That said, fraught reports proclaiming that spooked investors may be turning their back on U.S. Treasuries are excluding a key piece of context:9 borrowing costs are rising sharply for governments across the globe, not just the U.S.

There’s no doubt that the 10-year Treasury vaulting through the 5% threshold is a significant event, and that rapidly rising bond yields merit close monitoring. However, these developments must be contextualized against the increase in borrowing costs for most advanced economies rather than treated as indicative of a U.S.-specific penalty that bond investors are applying to Treasuries.

Perhaps a harder reality is that if governments are unwilling to commit to fiscal restraint or raising taxes, the only feasible way to bring soaring public debt burdens under control is by stimulating economic growth. The question is, would electorates across advanced economies accept an additional 50 basis points of annual consumer price inflation as the cost for bringing national budgets into surplus?

The question is less outlandish than it might at first seem. The origin of the now ubiquitous 2% annual inflation target set by the world’s central banks is actually somewhat dubious. The Reserve Bank of New Zealand is believed to have been the first to annunciate such a target in 1990,10 but it appears to have first originated as an off-the-cuff remark made by the nation’s finance minister during a 1988 television interview.11 For its part, the Federal Reserve did not formally stipulate 2% to be its official inflation target until 2012.12

If this target is little more than an arbitrary number that came to be accepted as conventional wisdom over decades by central banks around the world, perhaps it is time for monetary authorities to engage in an open-minded reexamination of whether current inflation targets are correctly calibrated to the needs of advanced economies in the 21st century.

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