U.S. real interest rates rise to highest in over a year! AI investment supports economic resilience, oil price surge reignites rate hike expectations.

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The US inflation-adjusted Treasury yields have risen to their highest level in over a year, as the dual factors of rising oil prices and a still robust economy have once again sparked speculation in the market that the Federal Reserve may begin raising interest rates in the coming months.

The yield on 10-year US inflation-protected bonds climbed to about 2.3% on Wednesday, the highest level since April 2025. The so-called real yield increase has enhanced the appeal of the dollar while raising the opportunity cost of holding non-interest bearing assets such as gold and cryptocurrencies, thus putting pressure on these assets.

This trend reflects investors' belief that, fueled by the investment boom in artificial intelligence, the resilient US economy will lead Federal Reserve officials to believe the central bank can tighten monetary policy without affecting growth. On Wednesday, traders raised their bets that the Federal Reserve will hike rates before October, as renewed escalation in the US-Iran conflict pushed up oil prices and triggered inflation concerns.

Gennadiy Goldberg, Head of US Rates Strategy at TD Securities, said:

"The rise in real interest rates is jointly driven by expectations of robust growth, and market concerns that the Federal Reserve may need to further tighten policy in the context of escalating Middle East conflicts."

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