US Real Interest Rates Rise to Over a One-Year High! AI Investments Support Economic Resilience, Oil Price Surge Rekindles Rate Hike Expectations

U.S. inflation-adjusted Treasury yields have risen to their highest level in over a year, as a combination of rising oil prices and a still-robust economy has once again sparked speculation that the Federal Reserve may begin raising interest rates in the coming months.

The yield on 10-year U.S. Treasury Inflation-Protected Securities (TIPS) rose to about 2.3% on Wednesday, the highest level since April 2025. The rise in so-called real yields has increased the appeal of the dollar, while also raising the opportunity cost of holding non-interest-bearing assets such as gold and cryptocurrencies, thereby putting pressure on these assets.

This trend reflects investors' belief that, fueled by the boom in artificial intelligence investments, the resilient U.S. economy will convince Federal Reserve officials that the central bank can tighten monetary policy without impacting growth. On Wednesday, traders increased their bets that the Fed would raise interest rates before October, as renewed escalation in U.S.-Iran tensions pushed oil prices higher and sparked inflation concerns.

Gennadiy Goldberg, Head of U.S. Rates Strategy at TD Securities, stated:

“The rise in real interest rates is being driven by robust growth expectations and concerns in the market that the Fed may need to further tighten policy as the Middle East conflict escalates.”