Report published September 30, 2026

Bonds: Where Do Yields Go from Here? – TS Lombard Rates Strategy

TS Lombard · September 30, 2026

TS Lombard argues that the breakout in global bond yields reflects higher policy rate expectations driven by energy price shocks and macro resilience rather than sovereign fiscal risk, hyperscaler debt crowding out, or Yen carry trade unwinds. Investors should close bond shorts but avoid treating this selloff as a buying opportunity, as compressed term premia and tight labor markets leave yields biased to the upside.

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Finvaulta summarizes TS Lombard's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.

Key Takeaways

1.The recent global bond selloff is driven by energy price shocks and higher monetary policy expectations amid global economic resilience, not fiscal panic, AI hyperscaler debt crowding-out, or Yen carry trade unwinds.
2.Term premia remain compressed by historical standards and represent the primary upside risk to yields as bond markets fail to price in a macro regime characterized by persistent negative supply shocks and higher inflation volatility.
3.While short bond positions should be closed as a 5% Fed funds terminal rate is now priced in, bonds are not yet a buying opportunity because labor markets remain strong, inflation is sticky, and AI will not deliver immediate disinflation.

1. WELCOME TO THE PARTY
Why has TS Lombard been secular bond bears?
What has driven the latest rise in global yields?
Are yields now close to fundamentals?
What about bond yields outside the US – isn't that a bit more sinister?
2. BOND FACTS VS FICTION
What is the risk to term premia from here?
What about 'debasement' and fiscal risks – are they are a concern?
Are the hyperscalers crowding out government debt?
Should investors be worried about the Yen carry trade?
3. BUYING OPPORTUNITY?
Is now a good time to buy government bonds again?
What about the impact of the AI boom – could that make bonds a 'buy'?
Bottom line

Report data

Chart 12: Term premia at low end of past norms

Metric	Estimate	Context
Terminal Fed Funds Rate Priced by Market	5.0%	Market expectations for the terminal Fed funds rate, aligning with TS Lombard's earlier forecasts.
Core Inflation Range	2.5–3.5%	Core inflation settling above the pre-COVID 2% ceiling.
Historical US Term Premium Range	0.5–2.5%	Historical range for the US term premium, with current levels hovering near the low end.
Variation in US Term Premium Explained by Net Duration Supply	<1.0%	Net supply of duration explains less than 1% of the variation in the US term premium post-2008.
Projected AI Hyperscaler Debt Issuance	500 USD Billion	Hyperscaler debt securities issuance projected next year, exceeding combined UK and German issuance.