The sharp selloff in U.S. Treasuries that has accelerated in recent weeks appears far from exhausted, with analysts warning that stubborn inflation, elevated energy prices from the Middle East conflict, and structural changes in the investor base could push yields meaningfully higher in the near term.

The benchmark 10-year U.S. Treasury yield was last hovering near 4.62%, having decisively broken above the 4.5% psychological level that had long served as a strong buying zone for many investors, according to Reuters.

Padhraic Garvey, head of global rates and debt strategy at ING, expects further upside.

“The question going forward is: will guys really buy here because I believe this (selloff) will continue to persist. We’re probably headed to 4.75% in the next round,” Garvey said.

Core Drivers: Persistent Inflation and Energy Shock

The primary force behind the move remains inflation. Recent consumer and producer price reports have consistently beaten expectations, reinforcing the view that price pressures are proving more sticky than markets had anticipated. Market-implied long-term inflation expectations (breakevens) on the 10-year note have climbed to 2.507%, approaching a three-year high.

Garvey noted that even modest further increases in these expectations could generate significant additional upward pressure on yields.

“That’s how you get the next 10, 20, 30 basis points into the upside in yields very easily,” he said.

The ongoing disruption in the Strait of Hormuz and elevated oil prices are playing a central role. Brent crude remains firmly above $110 per barrel, and analysts like Garvey believe prices are unlikely to revert to pre-conflict levels even if a diplomatic resolution is reached.

“Even if we get a [Middle East] deal… oil is not going back to pre-war levels. We think it’s going to be 25-30% higher in six months’ time,” he added.

This energy-driven inflation is forcing investors to reassess the Federal Reserve’s likely path. Rate cut expectations have been pared back sharply, with some pricing in the possibility of no cuts — or even hikes — later this year.

The long end of the curve faces particular strain. Guneet Dhingra, head of U.S. rates strategy at BNP Paribas, observed that once 30-year yields broke above 5%, they lost their previous technical ceiling.

“Now that we have no anchor, what stops bond yields from going up in a world of high inflation, ever-rising deficits, and global bond yield pressure?” Dhingra asked.

A Bank of America survey released this week underscored the shift in sentiment: 62% of global fund managers now expect 30-year Treasury yields to reach 6% — levels last seen in the late 1990s — compared with only 20% targeting 4%.

Changing Composition of Treasury Buyers Adds Fuel

A critical but underappreciated factor is the evolution of who is buying U.S. government debt. Traditional large, price-insensitive buyers, such as central banks from surplus countries, have been gradually replaced by more yield-sensitive investors channeled through major financial hubs like the UK, Belgium, the Cayman Islands, and Luxembourg.

The UK overtook China last year to become the second-largest foreign holder of U.S. Treasuries, with nearly $900 billion in holdings. These newer buyers tend to be more reactive to market moves, meaning higher yields do not automatically attract strong demand as they once did. This shift allows yields to climb further before finding equilibrium.

Rising Treasury yields are transmitting tighter financial conditions across the economy. Higher borrowing costs are already weighing on mortgage rates, corporate debt issuance, and consumer spending. This dynamic poses a headwind for equity valuations, particularly in rate-sensitive sectors such as technology, real estate, and utilities.

Jim Barnes, director of fixed income at Bryn Mawr Trust, summarized the psychological shift, saying, “It’s a different interest rate environment. In the absence of any positive news on Iran and combined with data pointing toward inflationary pressures, it’s as if the bond market just threw up its hands and just said we have to reprice the market higher.”

While short-term dips are possible, especially if Middle East tensions ease or upcoming inflation data surprises to the downside, the structural forces at play suggest the Treasury bear market has considerable room to run. Persistent deficits (exacerbated by likely government fuel subsidies), elevated energy prices, and a more price-sensitive buyer base create conditions for yields to test higher levels before finding a sustainable floor.

Standard Chartered announced on Tuesday a significant restructuring plan that will eliminate more than 7,000 roles by 2030, equivalent to 15% of its corporate and support functions, as the bank aggressively embraces artificial intelligence and automation to reshape its operations and drive sustainable profitability.

The move positions StanChart among the most assertive global banks in using AI not merely as a productivity tool, but as a structural replacement for what CEO Bill Winters described as “lower-value human capital.”

“It’s not cost-cutting. It’s replacing in some cases lower-value human capital with the financial capital and the investment capital we’re putting in,” Winters told reporters.

With a global workforce of nearly 82,000, the bank will focus reductions primarily on back-office and middle-office functions in key hubs including Chennai, Bengaluru, Kuala Lumpur, and Warsaw. Winters stressed that impacted employees will be offered substantial reskilling and redeployment opportunities.

“So, the people that want to reskill, that want to carry on, we’re giving every opportunity to reposition,” he added.

The job cuts form the centerpiece of a broader strategy refresh aimed at lifting returns and sharpening competitive edge. StanChart set new targets of delivering over 15% Return on Tangible Equity (ROTE) by 2028, more than three percentage points above 2025 levels, and building toward approximately 18% by 2030. The bank also accelerated its wealth management goal, targeting $200 billion in net new money by 2028, one year earlier than previously planned.

The strategy emphasizes higher-margin businesses, particularly affluent retail clients and financial institutions within its corporate and investment banking division. Early signs are encouraging: the bank reported record wealth revenue and strong client inflows in the first quarter.

StanChart’s overhaul reflects a broader industry reckoning. As digital-native challengers and big tech encroach on traditional banking services, established players are racing to modernize. Japanese lender Mizuho announced up to 5,000 job cuts over a decade in March, while several global banks are quietly integrating frontier AI models across risk management, compliance, customer service, and operations.

What distinguishes StanChart’s approach is the explicit framing of AI as a direct substitute for certain human roles rather than just a supporting tool. This marks a philosophical shift in how leading banks view workforce composition in the AI era — moving from augmentation to strategic substitution in repeatable, lower-judgment processes.

However, analysts offered cautious optimism. While the targets are viewed as credible, Ed Firth at Keefe, Bruyette & Woods noted they sit at the more conservative end of expectations.

“In a world full of uncertainty, performance may prove more challenging further out,” Firth said.

StanChart’s core markets in Asia and Africa expose it to significant geopolitical and macroeconomic risks. The bank set aside $190 million in precautionary provisions in Q1 related to the Iran conflict. A prolonged Middle East crisis could pressure borrowers through higher energy costs and slower growth, potentially forcing further loan-loss provisions.

Despite these risks, Winters projected confidence.

“We are extremely resilient,” he said.

The announcement also helps stabilize internal speculation. Winters, who has led the bank for 11 years, indicated he will remain in place for the foreseeable future to oversee execution. On Monday, the bank appointed Manus Costello, a respected investor relations veteran and former equity researcher, as permanent CFO.

Shares in Standard Chartered fell around 0.5% in early trading, reflecting a measured response. Investors appear to be waiting for concrete evidence that the ambitious transformation can deliver superior returns in a more challenging operating environment.

This restructuring represents more than routine cost management. It is seen as a fundamental repositioning for an institution that spent much of the past decade fighting off takeover speculation. By leaning heavily into AI and automation while refocusing on high-return segments, StanChart is attempting to evolve from a geographically expansive but sometimes unfocused emerging markets bank into a leaner, more technology-driven franchise.

Analysts expect the success of this bet will depend on several factors, including the bank’s ability to retain and retrain critical talent, the pace and effectiveness of its technology integration, and its capacity to navigate external volatility in its key regions. If executed well, it could serve as a blueprint for other international banks facing similar pressures.