Oct 21, 2026 · 9 min · 6 segments
Apollo’s Torsten Slok examines the forces shaping the Fed’s next move, including rising inflation, elevated Treasury yields, credit conditions, and growing AI concentration.
Torsten SløkGuestDan CassidyHostThe 10-year as we're speaking today on Tuesday, October 13th, still above 5%, so I'm curious the factors that have driven rates higher.
When you look at the whole yield curve, one thing that becomes very important is that there are several forces putting upward pressure on the yield curve, and that's what you see in the chart that we brought along here today.
First you see in the front end that there's upward pressure from inflation being higher for longer.
But exactly as you're saying, Dan, in the long end, we have some fiscal challenges.
When fiscal challenges appear, of course we need to issue more treasuries, and when there's more issuance of treasuries, that also means that there's also more upward pressure on long-term interest rates.
And in the belly of the curve, the middle of the chart, you see that hyperscalers are also issuing more debt.
That money, which this year will be roughly around $700 billion, needs to come from somewhere.
And a lot of that money now is coming from other investment-grade assets such as treasuries.
So as a result, money is being substituted out of treasuries, which is investment grade, into another investment-grade assets, which is hyperscaler debt, and that is now also putting upward pressure on the yield curve.
So the whole yield curve is at risk of being higher for longer because we have this unique combination of both inflation being higher, fiscal problems, and the data center build-out putting upward pressure across the entire yield curve, leading to the conclusion that rates will be higher for longer.
The 10-year as we're speaking today on Tuesday, October 13th, still above 5%, so I'm curious the factors that have driven rates higher.
When you look at the whole yield curve, one thing that becomes very important is that there are several forces putting upward pressure on the yield curve, and that's what you see in the chart that we brought along here today.
First you see in the front end that there's upward pressure from inflation being higher for longer.
But exactly as you're saying, Dan, in the long end, we have some fiscal challenges.
When fiscal challenges appear, of course we need to issue more treasuries, and when there's more issuance of treasuries, that also means that there's also more upward pressure on long-term interest rates.
And in the belly of the curve, the middle of the chart, you see that hyperscalers are also issuing more debt.
That money, which this year will be roughly around $700 billion, needs to come from somewhere.
And a lot of that money now is coming from other investment-grade assets such as treasuries.
So as a result, money is being substituted out of treasuries, which is investment grade, into another investment-grade assets, which is hyperscaler debt, and that is now also putting upward pressure on the yield curve.
So the whole yield curve is at risk of being higher for longer because we have this unique combination of both inflation being higher, fiscal problems, and the data center build-out putting upward pressure across the entire yield curve, leading to the conclusion that rates will be higher for longer.
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