Jefferies’ Chris Wood sees a structural bear market in US bonds. What it means for stocks and gold

The US bond market may be entering a new era of persistent pressure, with Jefferies’ global head of equity strategy, Chris Wood, warning that long-term Treasury bonds remain in a “structural bear market” even as Washington steps up efforts to control yields.

The US 10-year Treasury yield stood at 4.77%, just above Treasury Secretary Scott Bessent’s perceived 4.75% “line in the sand”, according to Jefferies’ latest GREED & fear note. The report argues that attempts to suppress long-term borrowing costs could ultimately weaken the dollar, thereby strengthening the case for gold and gold-mining stocks.

“Long-term Treasury bonds are in a structural bear market,” Jefferies said. “The more yields are successfully controlled via manipulation, if not outright fixed YCC-style, the more it is a reason to sell the US dollar and own gold and gold mining stocks.”


The warning comes as investors weigh three forces that could keep bond yields elevated: sticky inflation, accelerating nominal economic growth and rising borrowing by companies investing heavily in artificial intelligence.

Jefferies said the Treasury has become more important than the US Federal Reserve in determining the direction of long-term yields.

Bessent has indicated that the US could increase Treasury buybacks at the long end of the curve. There have also been suggestions that the Treasury could use funds from its Treasury General Account to purchase long-term government bonds.

Jefferies described the potential shift as “Treasury QE”, rather than the traditional form of Federal Reserve-led quantitative easing.

While the announced buybacks and the Treasury’s willingness to purchase more bonds if yields rise are not technically quantitative easing, Jefferies cited what it called “strong similarities”.

The report said the Treasury’s desire to control yields is fundamentally inflationary in the sense of currency debasement. It also creates the impression that policymakers are motivated by the cost of servicing the federal government’s debt.

For now, Jefferies said Bessent’s approach appears to be working, with the 10-year yield not yet definitively breaching the 4.75% threshold. However, it warned that it is still early days.

Inflation remains the market risk

Both US headline consumer-price inflation and core personal consumption expenditures (PCE) inflation have remained above the Federal Reserve’s 2% target for 65 months, according to the report.

Jefferies said inflation increasingly appears to be settling in the 3%-4% range. US nominal GDP growth has run at a trend rate of 5.7% year-on-year over the past 12 quarters and rose 6.6% in the second quarter of 2026. That compares with a trend rate of 4.7% in the three years to 2019.

The report said faster nominal growth points to higher long-term bond yields ahead.

The next monthly inflation report, due on September 11, has become particularly important following Kevin Warsh’s hawkish speech at Jackson Hole. Warsh noted that 54% of the 199 individual components in the PCE basket had recorded price increases above 3% over the past year, compared with an average of 32% in the two decades before the pandemic.

Jefferies said a weak inflation reading could make it politically difficult to leave monetary policy unchanged at the Federal Open Market Committee’s September 15-16 meeting. Money markets were pricing in a 15-basis-point Fed rate increase in September and 37 basis points by the end of 2026.

AI boom carries a bond market cost

The artificial intelligence investment cycle is supporting US economic growth, but it is also adding to inflationary pressure and demand for long-term funding.

AI-related capital expenditure accounted for 1.02 percentage points, or 48%, of US real GDP growth in the four quarters through the second quarter of 2026, Jefferies said.

The five hyperscalers, including Oracle, issued $223 billion of bonds so far this year, compared with $108 billion in 2025. Alphabet alone raised $29 billion in August.

Credit spreads have also widened. Spreads over Treasuries for Amazon, Alphabet and Meta rose to 85 basis points, 75 basis points and 106 basis points, respectively, from 60 basis points, 51 basis points and 80 basis points in early June.

That borrowing demand is competing with the US government for long-term funding, adding another source of pressure on the bond market.

Jefferies said there is currently no sign that the AI capex cycle is collapsing. It continues to favour what it calls the “picks and shovels trade”, with memory stocks still consolidating after a sharp selloff in July.

However, the report warned that the US economy could become vulnerable if the AI investment boom suddenly implodes. It also highlighted a deeper risk: even if AI succeeds in boosting output, it could put pressure on wage income by enabling more production with less labour input.

Labour income as a share of US output fell to a record low of 52.9% in the second quarter of 2026, according to the report.

What does it mean for stocks?

The bond market warning creates a more difficult environment for equity markets, particularly for assets that depend heavily on low long-term interest rates.

Jefferies pointed to the contrast in Singapore, where the Straits Times Index rose 23.7% year-to-date, while the Singapore REIT index fell 9%. The three bank stocks that account for 58% of the index gained 41.6%.

The report said the selloff in REITs reflected the impact of rising bond yields on the spread between government bond returns and property income.

However, Jefferies also saw a potential opportunity in Singapore REITs. The estimated 2026 dividend yield for the sector rose to 6.3%, while the Singapore 10-year government bond yield was 2.37%, leaving a 3.9-percentage-point spread.

The brokerage cautioned that investors may continue to price Singapore REITs against US Treasury yields, even though Singapore’s own 10-year yield had risen only 27 basis points this year, compared with a 60-basis-point increase in the US 10-year yield.

Among the largest REITs under Jefferies’ coverage, it preferred more domestically focused portfolios. Frasers Centrepoint Trust has 100% of its assets in Singapore, while CapitaLand Integrated Commercial Trust has 94%.

Gold gains strategic appeal

Jefferies’ clearest asset-allocation message is its preference for gold and gold-mining stocks. If the Treasury succeeds in suppressing long-term yields through buybacks or other interventions, Jefferies expects such policies to reinforce concerns about dollar debasement. If it fails, higher market-determined yields could continue to pressure bond-sensitive assets.

Either way, the brokerage sees long-term Treasuries as vulnerable.

That is why Jefferies remains constructive on gold, while treating the bond market as a structural rather than temporary problem. The immediate direction of yields may still depend on inflation data and US Fed policy, but the report’s broader message is that investors should prepare for a prolonged repricing of bonds, currencies and interest-rate-sensitive assets.