Barclays Sees 10-Year Treasury Yield Climbing Further as Markets Doubt Buybacks Can Cap Rates

Prediction markets are increasingly pricing in higher U.S. Treasury yields this year. Contracts on Kalshi and Polymarket point to growing odds that rates keep rising, even as U.S. Treasury Secretary Scott Bessent turns to buybacks and other tools to lean against long-end yields. Barclays goes further, estimating the "fair" yield on the 10-year Treasury could reach 4.95%. The bank argues the recent uptick in yields reflects forces that are unlikely to be neutralized by a few rounds of repurchases. On Kalshi, traders currently assign a 56% probability that the 10-year yield will reach or exceed 4.75% by the end of 2026, and a 27% chance it tops 5% by year-end. As of Monday afternoon, the 10-year yield was around 4.7%. On Polymarket, traders see roughly a two-thirds chance the 10-year yield exceeds 4.8% at least once this year. Activity in these markets remains modest—Kalshi-linked contracts have traded just over $16,500—so they are not institutional forecasts. Still, they echo a broader view: buybacks may temporarily compress yields, but they do not address the core question of who ultimately finances U.S. fiscal spending. Global bond markets sold off over the past week as the U.S.-Iran conflict revived inflation worries and U.S. national debt surpassed $40 trillion for the first time, intensifying fiscal risk concerns. Bessent then announced a doubling of long-term Treasury buyback sizes to steady the market. Yields dipped briefly after the announcement, then rebounded. On Monday, reports that the Treasury might draw about $1 trillion from its Treasury General Account (TGA) to fund an expanded repurchase program triggered another short-lived decline in yields. Critics note that repurchasing Treasuries does not reduce the government's overall financing need. Citadel Securities, a subsidiary of Citigroup, has warned the approach carries risks, likening the effort to suppress long-term yields via buybacks to "financial repression". The firm argues that if bond prices are prevented from falling enough for yields to reflect genuine fiscal and inflation risks, the pressure does not vanish—it migrates to other markets. Nohshad Shah, Head of Fixed Income Sales for Europe, the Middle East, and Africa at Citadel Securities, said capping Treasury yields could weaken the dollar's appeal and add to inflation through higher import prices. That framework helps explain a recent mix in markets: limited gains in long-term Treasuries, a softer dollar, and renewed strength in gold. With the 10-year yield near 4.7%, investors are asking whether Treasuries are finally attractive. Barclays' answer is no. Strategists Ajay Rajadhyaksha and Anshul Pradhan argue the drivers pushing yields higher have not run their course. Barclays breaks the 10-year yield into two components: the market's expectation for the average short-term policy rate over the next decade, and the term premium—the extra compensation investors demand for interest-rate, inflation, and fiscal uncertainty. The bank estimates the neutral rate at about 3.65%, and a term premium of roughly 130 basis points, implying a fair 10-year yield near 4.95%—around 25 basis points above current levels. Barclays is particularly focused on persistent inflation and a rising fiscal term premium. U.S. inflation has missed the Federal Reserve's 2% target for six straight years, and growing debt implies an expanding supply of Treasuries. Once investors question whether the market can absorb that flow of issuance, they typically demand higher yields. With Treasury debt now above $40 trillion, Barclays sees those concerns coming to the surface. The bank also flags limited political momentum for fiscal consolidation. External competition for capital is also rising. Japan's 10-year government bond yield is approaching 2.9%, and yields on Japan's ultralong bonds have moved above 4% for the first time. For Japanese institutions that hold U.S. Treasuries over long horizons, domestic alternatives are becoming more compelling. Barclays also points to elevated corporate financing needs: the AI boom is driving large-scale capital spending by U.S. companies, increasing demand for funding. The conclusion from Barclays is blunt: a 4.7% 10-year yield does not yet compensate investors for the risks that bias yields upward. The "TINA" era is fading, and bonds are becoming genuinely competitive. Not everyone is bearish on Treasuries, and the bigger shift may be in equities. Ed Clissold, Chief U.S. Strategist at Ned Davis Research, argues that as interest rates rise structurally, markets are moving from "TINA" ("There Is No Alternative") to "TARA"—"There Are Real Alternatives." In 2016, 63.4% of S&P 500 constituents had dividend yields above the 10-year Treasury yield; today that share is under 4%, the lowest since 2007. A risk-free yield around 4.7% is increasingly forcing a direct comparison with equity returns.