The price of money is back

As of 3 November 2026, US ten-year Treasuries yield 4.91% (2 November close), the Fed has held its range at 3.75%-4.00% and the ECB its deposit rate at 2.50%, so high-quality bonds again pay enough to contribute to long-term wealth growth.

That income comes with price risk: a bond fund with a modified duration of eight years loses about 8% if yields rise by one more percentage point. Cash at regulated savings rates is losing purchasing power instead: French harmonised inflation rose to 3.8% in October on INSEE's provisional estimate, against 1.7% on the Livret A. Higher rates also make borrowing harder for companies and lower the price investors pay for profits expected years from now.

Key takeaways

1. Central banks are holding rates at their higher level rather than cutting. The Fed held at 3.75%-4.00% on 28 October 2026 by a 10-2 vote and the ECB kept its deposit rate at 2.50% on 29 October; the Bank of Japan kept its policy rate at around 1.25% on 30 October by an 8-1 vote, with the dissenter proposing a rise to 1.5%.
2. Long-term yields are far above the zero-rate era, for different reasons in each country. The US ten-year yield was 4.94% on 30 October 2026 against 0.52% in August 2020, and the French ten-year reached 5.14% on 22 October, its highest since June 2002.
3. Higher rates squeeze borrowers and lower the value of distant profits. Refinancing €100m from 2% to 6% costs €4m more a year, and €100 due in ten years is worth about €61 today at a 5% discount rate against €82 at 2%.
4. In copio's estimates, high-quality bonds now offer about 4-5% a year in euros, with duration risk. That is roughly 1.8-2.8% a year after copio's 2.2% inflation assumption, while the Livret A pays 1.7% and French HICP inflation was 3.8% in October 2026 on INSEE's provisional estimate.

Central banks are holding rates at a higher level

The 2026 energy shock raised prices across the major economies. In September, the Federal Reserve raised its policy range to 3.75%-4.00%, its first increase since July 2023, and the ECB raised its deposit rate to 2.50%. 3 4

On 28 October 2026, the Fed held its range at 3.75%-4.00% by a 10-2 vote, with the two dissenters preferring a further quarter-point rise and the statement noting that inflation remains elevated. 22 On 29 October 2026, the ECB kept its deposit facility rate at 2.50%, its main refinancing rate at 2.65% and its marginal lending rate at 2.90%. 23

The ECB said energy prices posed upside risks to inflation and downside risks to growth, that financing conditions had tightened since its previous meeting, and that it was not pre-committing to a rate path. On the same day, the ECB announced that Christine Lagarde will step down as President on 7 February 2027. 24

The Bank of Japan ended negative rates and yield-curve control in March 2024. 19 On 18 September 2026, it raised its policy rate to 1.25%, effective from 24 September. 20 On 30 October 2026, it kept the rate at around 1.25% by an 8-1 vote; board member Takata Hajime proposed raising it to around 1.5%. 30 The Bank also decided to sell its exchange-traded fund holdings faster from January 2027, at about ¥860bn a year at book value instead of about ¥330bn.

The next scheduled decisions are the Fed's on 9 December, the ECB's on 17 December and the Bank of Japan's on 18 December 2026. 25 26 27 None of these schedules says what the decisions will be.

Inflation is only part of the explanation for higher long-term yields. Between 27 February and 5 October 2026, the US ten-year yield rose from 3.97% to 5.31%, while its inflation-protected counterpart rose from 1.72% to 2.95%. 2 Most of that move was in the real yield, the return investors demand after expected inflation.

Long-term yields are high again, for different reasons

On 4 August 2020, the US ten-year Treasury yielded 0.52%. German and French ten-year bonds had negative average yields that year. 2 5 Investors seeking a return had a strong incentive to move into equities, property and other riskier assets.

On 2 November 2026, US government yields were 4.59% at two years, 4.91% at ten years and 5.28% at thirty years, after 4.94% at ten years on 30 October; the ten-year yield had reached 5.31% on 5 October. 32 1 The French ten-year yield averaged 4.44% in September in the OECD series below, reached 5.14% on 22 October, its highest level since June 2002, and eased to 4.98% on 26 October. 14 6 28 The Bundesbank's estimate of the ten-year German government yield was 3.37% on 2 November 2026. 29

OECD monthly averages, January 2015-September 2026. Nominal yields in each country's currency. Download data.

Our view is that the cost of borrowing will remain a more important constraint than it was in the 2010s, because government financing needs are large and inflation has been volatile. Rates can still fall during a slowdown, which is one reason to consider bonds while yields are higher. Long-term yields reflect expected policy rates, inflation and the compensation investors demand for holding debt through uncertain years, and fiscal pressures differ by country.

United States: tax choices and persistent deficits

Washington continues to spend more than it collects in tax. In fiscal 2026, larger business-investment deductions helped reduce corporate income-tax receipts by $71bn, even as total government spending rose. 7 Federal net interest reached about $1.1tn in fiscal 2026, roughly 19% of revenue, adding another large claim on the budget. 7

The dollar's reserve role helps finance those choices. Foreign investors held $9tn of marketable Treasury securities in early 2025, about 32% of the total. 15 That demand supports Treasury prices, but as borrowing grows, the Treasury must place more debt with investors whose other choices also offer higher yields.

Europe: German investment and the cost of ageing

Germany has changed its fiscal rules to finance defence and infrastructure. Its €500bn infrastructure fund and the exemption for qualifying defence spending above 1% of GDP create room for more borrowing and investment. 16 More Bund supply and stronger demand for construction, equipment and labour can lift euro-area yields.

Other European governments face greater pressure from existing commitments to pensions, health care and long-term care as populations age. 17 France has less room to absorb it, as discussed in the Europe article. For an investor, the common euro interest-rate outlook and the extra yield demanded from a particular government are separate exposures: German investment can raise the benchmark rate while French fiscal concerns widen the spread above it.

Japan: an old debt burden meets higher interest rates

Japan's ageing population and social-security commitments predate the recent rise in yields. Japan's FY2026 budget allocates ¥39.1tn to social security and ¥31.3tn to debt service, up from ¥28.2tn in FY2025; debt service includes ¥18.2tn of principal repayments as well as interest. 18 As bonds mature, higher yields gradually feed into the government's interest bill. More attractive domestic yields can also draw Japanese savings back from foreign bonds.

A US Treasury, a Bund, a French OAT and a Japanese government bond therefore carry different combinations of fiscal, interest-rate and currency exposure.

Higher rates squeeze borrowers and distant profits

Falling rates helped companies in two ways over the last generation. Interest expenses declined as debt was refinanced, and investors accepted lower returns on future cash flows, which supported higher share prices. An analysis of S&P 500 non-financial companies found that interest and tax together fell from 54% of operating profit in 1989 to 27% in 2019. 9 Strong share returns therefore depended partly on financing and tax conditions as well as on better products or faster sales growth.

Bondholders benefited directly when rates fell because the price of their existing bonds rose. From 1982 to 2020, US ten-year Treasuries returned about 5% a year after inflation in the historical series used here. During the rising-rate period from 1941 to 1981, they lost about 2% a year after inflation. 8

Higher rates now reverse part of that support, starting with the debt repayment schedule. A company with fixed-rate debt due in ten years has time to adjust; one refinancing next year faces the current borrowing cost much sooner, and floating-rate borrowers feel the increase as their payments reset. A business refinancing €100m from 2% to 6% pays €4m more in annual interest. If its operating profit is €10m, that increase uses up 40% of the profit before other financing costs and tax.

Office property and heavily indebted private businesses have shown some of the strain. The delinquency rate on US office loans packaged into securities reached a record 12.34% in January 2026. 11 The Federal Reserve has also identified borrowers using floating-rate leveraged loans and private credit as having weaker debt-servicing capacity. 10 Profitable companies with cash reserves or debt locked in at low rates have more flexibility, and higher interest income can even help a cash-rich business.

Higher rates also lower what investors will pay today for profits expected years from now. A €100 payment ten years from now is worth about €82 today when discounted at 2%, and about €61 at 5%. Companies can offset that effect by growing earnings faster, so higher rates do not automatically mean falling share prices. They do raise the growth a highly valued company must deliver to justify its price.

Bonds pay again, with duration and currency risk

A bond promises specified cash flows, subject to the issuer paying, and its yield reflects those payments and the price you pay for them. For an individual bond held to maturity, yield-to-maturity describes the annualised return if the issuer pays and coupons are reinvested at that yield. A fund continually replaces bonds, so its return depends on yield changes, defaults, costs and how its portfolio evolves. A higher starting yield generally gives more income and more room to absorb a price decline.

Duration measures sensitivity to changes in yield. A bond with a modified duration of eight years loses roughly 8% of its price if yields rise by one percentage point, before coupon income and other effects; at fifteen years, the same first-order estimate is a 15% loss. That is why a longer bond can be a useful holding for a recession and an uncomfortable one during another inflation shock.

A US Treasury pays dollars. If the dollar falls against the euro, a French investor can lose part or all of the interest through the currency move. Currency hedging changes that exposure, with a cost or benefit linked to short-term interest-rate differences and market pricing, but a hedged long bond still carries interest-rate risk if you sell before maturity. The US ten-year yield is a useful reference for global financing conditions, not a guaranteed return on euro savings.

Copio's assumptions estimate compound returns over ten to fifteen years in euros. They include currency hedging where the row says so, before product costs and personal taxes.

The bond segments offer around 4-5% expected return with substantially lower estimated volatility than equities. Against our 2.2% inflation assumption, their expected real returns are roughly 1.8-2.8% a year. US aggregate bonds include credit exposure; their 5.1% estimate is a modelled long-term return for a hedged basket. Equities still offer higher expected returns, but the difference is smaller than when bonds paid almost nothing, so a target may require less equity exposure than an allocation designed during the zero-rate years.

The Livret A pays 1.7% from August 2026, while French annual inflation, on the harmonised HICP measure, was 3.8% in October 2026 on INSEE's provisional estimate, up from 3.4% in September. 12 21 On the national CPI measure, inflation was 3.4%, with energy prices 24.1% higher than a year earlier.

If both rates persisted for a full year, purchasing power would fall by about 2.0%, calculated as 1.017 divided by 1.038, less one. INSEE's first estimate, published the same day, shows French GDP fell 0.1% in the third quarter, so the higher inflation is arriving alongside weak growth. 31 The inflation reading looks backwards, INSEE publishes the final October figures on 13 November, and both rates can change.

Euro funds in individual life-insurance contracts paid an average 2.63% in 2025, net of management fees and before social charges, according to the ACPR. 13 They often hold older, lower-coupon bonds, so higher market yields feed through gradually, and the credited return needs to be read alongside contract charges, taxes and the terms of the capital guarantee. These products remain useful for emergency reserves and spending you cannot postpone, where stable values and ready access matter more than a higher expected return.

Keep the near-term reserve separate, then evaluate the long-term portfolio on its expected growth after inflation, fees and taxes. Government bonds can help when a recession pushes rates lower, but inflation shocks can make stocks and bonds fall together, as they did in 2022. That makes duration, credit quality, currency and additional diversifiers part of the allocation decision. We would put bonds back into that decision now, because their income can contribute to wealth growth and reduces how much of the portfolio must rely on company profits meeting high expectations.

What you can do now

Higher yields reward the investor who knows what each bond holding is for, how long it lasts and which currency it pays in.

1. Write down the duration of every bond fund you hold. The factsheet states it; multiply it by one percentage point to see the approximate price fall if yields rise again.
2. Match each bond holding to a spending date and a currency. A euro expense in three years and a dollar Treasury fund with a duration of fifteen years carry different risks; list which holdings fund which goals.
3. Compare what your cash earns with inflation. The Livret A pays 1.7% from August 2026 against 3.8% HICP inflation in France in October 2026 on INSEE's provisional estimate; check the rate on each savings account and the credited rate of each euro fund you hold.
4. See how much of your portfolio relies on equities alone. In the Copio app preview, the allocation view shows your weights by asset class across accounts and the correlations view shows how your holdings move together.
5. Follow the dated decisions, not the headlines. The Fed decides next on 9 December, the ECB on 17 December and the Bank of Japan on 18 December 2026; note the yield on your bond funds' factsheets before and after each one.

Information only; no personal investment advice. Long-term estimates can differ substantially from realised returns. Past performance does not guarantee future results.