UBS says the volume of U.S. government borrowing distinguishes the current Treasury selloff from the bond-market losses surrounding the dotcom boom. With benchmark yields reaching their highest levels since 2002, the bank argues that ample debt supply could sustain elevated long-term borrowing costs even if the Federal Reserve holds policy steady.
The fiscal contrast is central to its assessment. A federal budget surplus in 1999 allowed the Treasury to repurchase 30-year securities. That reduced the availability of long-maturity bonds and lowered the term premium, or additional compensation investors require to hold debt over longer periods.
The current deficit, by comparison, amounts to more than 6% of gross domestic product, UBS says. Investors must accommodate a much larger supply of long-duration securities and are seeking greater compensation to do so. The bank sees that difference as a reason not to assume yields will decline quickly once monetary tightening stops.
Monday’s trading pushed the 10-year Treasury yield to a level last recorded in April 2002, while the 30-year reached its highest point since May of that year. UBS cited a recent 10-year reading of 5.34% and an intraday peak of 5.69% for the 30-year.
Some of that increase was reversed on Tuesday. The 10-year yield slipped by more than two basis points to approximately 5.29%, but remained substantially above its January 1 level of 4.21%.
The pressure on government bonds extends beyond the United States. French yields have reached highs spanning more than two decades, with large debt loads and political impasse hurting sentiment.
Other markets have also moved. The U.S. Dollar Index rose to its strongest level since early 2025, while gold faced pressure because higher yields increased the opportunity cost of owning the metal.
UBS acknowledges similarities between the two periods. Telecommunications infrastructure spending underpinned the late-1990s expansion; today, substantial investment is going into artificial intelligence data centers and supply-chain redesigns.
Both periods also combine higher capital costs globally with narrow credit spreads. During 1999, the 10-year Treasury yield approached 5.8% as the technology bubble moved toward its peak.
Yet monetary policy and economic conditions provide another distinction. Under Alan Greenspan, the Fed delivered six interest-rate increases from June 1999 through May 2000. UBS considers growth and employment conditions weaker now and does not expect the coming policy meeting to launch a comparable sequence of increases.
The next Federal Reserve meeting is scheduled for October 27–28, with the policy-rate target currently at 3.75%–4.00%. Following a subdued September employment report, concerns about another increase diminished. Traders assign approximately 80% odds to rates remaining unchanged.
Inflation indicators nevertheless remain a concern. September’s ISM services prices index reached 74 after increasing 1.4 points, showing that price pressures have not disappeared.
For investors, UBS frames the issue as more than a technology-spending cycle. Although AI investment invites comparisons with the dotcom period, the government’s financing needs are materially different. Elevated long-term yields may therefore reflect a lasting change in the debt supply investors must absorb, rather than a temporary late-cycle surge that unwinds when the Fed stops raising rates.
