Gulf Investors Turn to US Treasuries as 10-Year Yield Tops 5%
The rise in US bond yields is changing the return investors can get from relatively low-risk assets, while also influencing borrowing costs and investment decisions across global markets.
Investors in the UAE and wider Gulf region are showing strong interest in US Treasury bonds as the yield on the 10-year Treasury remains around 5%, its highest level since 2007.
The 10-year Treasury yield reached 5.34% last week, its highest level since 2002, before easing to around 5.26%. The yield was still significantly higher than a week earlier, when it stood near 5.08%, as investors assessed inflation, oil prices, and the outlook for US interest rates.
The higher yields have increased the appeal of US government debt for investors looking for income from relatively low-risk assets. Wael Makarem, financial markets strategist lead at Exness, told Khaleej Times that there is significant global interest in bonds offering yields around 5%, including among investors in the UAE and GCC
The move comes as global bond markets face renewed pressure from higher oil prices, inflation concerns, and uncertainty over the direction of interest rates. The recent rise in treasury yields has also pushed borrowing costs higher for governments and companies.
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Gulf investors face a changing investment landscape
For Gulf investors, the rise in US Treasury yields creates a stronger alternative to assets that carry greater market risk. A 10-year Treasury yield around 5% means investors can now consider US government debt alongside equities, corporate bonds, real estate, and other investments when allocating capital. The higher return also changes the level of performance investors may expect before taking additional risk.
Onyeka, financial researcher at Makon Financials, said the rise in treasury yields is important for because it changes the return investors can demand from other assets.
“When a major government bond market offers a yield around 5%, investments carrying higher risk have to offer enough potential return to remain attractive,” Onyeka said.
The impact extends beyond investors who directly buy Treasuries. Higher US government bond yields can influence global borrowing costs, equity valuations, and the pricing of other financial assets.
Markets remain focused on the Federal Reserve
The direction of US interest rates remains central to the Treasury market.
US employment data released last week showed weaker-than-expected job growth in September, reducing expectations of another Federal Reserve rate increase this month. Reuters reported on Monday that markets were pricing in less than a 20% chance of an October rate hike.
Despite the weaker labour-market data, treasury yields remain elevated. Rising oil prices and concerns about inflation are keeping investors cautious about how quickly US monetary policy can ease.
Brent Crude was trading around $101.52 a barrel on Monday, according to Reuters, adding another factor to the inflation and interest-rate outlook.
For Gulf investors, the combination of higher Treasury yields and uncertainty across global markets is making US government bonds more relevant to portfolio decisions. The question now is whether yields remain around current levels or move higher as investors assess inflation, oil prices, and the next moves by the Federal Reserve.
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