The first is a very notable change since our last meeting 42 days ago: Nominal and real yields are materially higher across the Treasury curve. – Federal Reserve Chaiman Kevin Warsh, July 29, 2026
The first is a very notable change since our last meeting 42 days ago: Nominal and real yields are materially higher across the Treasury curve.
The 30-year Treasury Inflation-Protected Security (TIPS) yield has returned to nearly 3%, its highest level since the Global Financial Crisis. Recent market commentary has focused on the inflation-adjusted return investors can now lock in through long-term TIPS. The 30-year nominal U.S. Treasury yield, meanwhile, reached 5.27% last week, the highest mark since 2007, and now stands at 5.17%. Its path has closely followed the real yield, showing that the rise in TIPS yields is part of the wider repricing of long-duration U.S. government debt.
The nominal Treasury yield combines real yield with inflation compensation. The current 5.17% nominal yield combines a 2.97% real yield with an implied breakeven near 2.2%. After the July Federal Open Market Committee meeting, Federal Reserve Chairman Kevin Warsh said increases in nominal and real yields rank in the top decile of the past two decades. Since the end of 2023, the nominal 30-year yield has risen 114 basis points (bps) and the real yield 107 bps, while the breakeven has increased only 7 bps. The market-implied long-term inflation rate has remained near 2.2%, which means nearly all of the increase in the nominal yield has come through the real yield.
Long-term nominal and real yields have risen across developed markets facing high sovereign debt, aging-related spending, geopolitical instability and rising capital demand from AI, defense and energy investment. In Japan, higher domestic yields and efforts to support the yen have renewed questions about demand for long-dated U.S. Treasuries. U.S. fiscal conditions add to these global pressures.
Large deficits and rising interest expense are narrowing the Fed’s room to maneuver. President Donald Trump made the conflict explicit on June 11, 2025, when he urged the Fed to cut rates because the government “would pay much less interest on debt coming due.” Easier policy, however, could raise long-term borrowing costs if investors doubt the Fed’s commitment to containing inflation. Long-term inflation pricing has remained relatively stable, but investors are demanding a higher return as the Fed’s next steps become less predictable and its commitment to the 2% inflation target is tested.
That uncertainty adds to the term premium, the extra yield investors demand for holding debt over long periods. Chairman Warsh’s reduced guidance after the July meeting left investors with less information about how the Fed would respond to renewed inflation pressure.
The Hurdle Rate for Risk Is Back suggests that the hurdle rate had returned as Treasury income rose and capital became more expensive for competing assets. This chart shows how much of that shift has come through real yields. The U.S. government must now offer almost 3% above inflation to borrow for 30 years. That return raises the benchmark for equities, credit, real estate and long-duration investment projects. Nominal and inflation-protected debt are repricing together as investors demand more compensation for time, policy uncertainty and the fiscal choices shaping the next three decades.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
