The 10-year Treasury yield reached a level it had not seen since 2007, and Guneet Dhingra's published view is that 5% yields are here to stay.
The usual reading of a bond sell-off is that the market is afraid of inflation. His is that growth has been the biggest and most persistent economic surprise of the past twelve months, and that the Fed has been adding to it by holding rates below neutral.
"And we think just like three hikes is not the ceiling, we think 5% is not the ceiling for the 10-year."
Dhingra heads US rates strategy at BNP Paribas, and he told the same program months ago that 5% would not cap the 30-year — which is the call the hosts came back to.
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👤 Guest: Guneet Dhingra, Managing Director, Head of US Interest Rate Strategy at BNP Paribas
🎙️ Host: Lisa Abramowicz, who co-anchors Bloomberg Surveillance
🧩 Other segments: Ted Mortonson of Baird, and Harvey Schwartz, CEO of Carlyle, interviewed by Bloomberg's Daniel Berger
📰 Published: 15 September 2026 on the Bloomberg Surveillance feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 6 min
Key Takeaways
BNP Paribas' published call is 5% on the 10-year, and Dhingra says that is not the ceiling
The Fed is hiking because it is behind the curve on growth, not only because of inflation
Small-cap stocks are up 15% in a year in which rates rose 100 basis points
The economy has stopped responding to the price of money
The AI build-out will not stop for 50 basis points, and neither will the top half of the consumer
A single hike buys the Fed nothing with the bond market
It has to show a sequence, not a one-and-done, to be credible on inflation
The Fed's own neutral-rate estimate has spent six years catching up to the market
His hiking cycle runs three at the low end and six at the high end
In the late 1990s the first three hikes did not move the needle and hikes four, five and six did
1. 5% Is Not the Ceiling
Abramowicz introduced the segment with the level — the 10-year yield hitting a level not seen since 2007, ramping up pressure on the Fed to hike for the first time in more than three years — and with Dhingra's own written warning that no relief is in sight.
The note she read: "5% 10-year yields are here to stay. Rate hikes are the necessary but not sufficient condition to prevent a rise in long-end yields."
She credited him with the earlier call on the 30-year, when he said five was not the ceiling, and asked whether he feels the same about tens. He said he does.
His explanation for how yields got here is that they were behind. "I think the issue with the way the real prices happen so far is just a reflection of where the fundamental economy has been, right? We are just catching up."
"In our outlook that we published a while back, we see long-end yields at 5% on the 10-year, here to stay. And we think just like three hikes is not the ceiling, we think 5% is not the ceiling for the 10-year."
2. Why the Fed Is Hiking
Dhingra's account of the Fed's motive is broader than the inflation mandate.
"I don't think the Fed is hiking just because they're concerned about the inflation problem." He said they are also hiking because they are concerned about being behind the curve on the AI build-out, consumer strength and the growth of the economy.
The evidence he offered is in equities, not in bonds. "You look at a world where small cap stocks are up 15% in a year when rates have gone up 100 basis points. That is unusual, and that's a sign of the economy really doing well."
3. Rates Do Not Bite
The second half of his argument is that the transmission mechanism has weakened, which is what turns a rate view into a level view.
"The other issue also is the economy is not very interest rate sensitive, right?"
"The AI build-out isn't going to stop based on a 50 basis point rise."
Nor will the better-off consumer. He described the top leg of the K — the half of the consumer distribution that is doing well — as unaffected just yet.
Fiscal spending, which is supposed to respond to interest rates, is not stopping either.
The conclusion follows directly. "And so I think my concern is you might need to see even higher yields from five percent tenure to have some slowdown at some point."
4. The Long End Does the Work
Abramowicz asked whether the long end is doing more of the policy work than the Fed's own rate.
"It typically always does."
His reason is structural. "The economy always has been designed to be more sensitive to where the 10-year and the 30-year yields are. Mortgage rates are indexed of that. Corporate borrowing is indexed of that."
A host tested the other direction: if the Fed hikes 75 basis points over the next six months, does that cap the 10-year nearer 5% than 5.5%?
"Yeah, so it's necessary but not sufficient, which means, yes, the hike is going to happen."
What the hike alone does not do is settle the question. "But I think the real question is the Fed needs to convince the bond market that there is a real plan to solve inflation."
"And that has to be through a sequence of hikes, not just a one-and-done, right?" His worry is that the Fed does one hike and treats it as enough for credibility — which he said might work temporarily, but the market needs assurance that more are planned.
5. Growth Is the Surprise
A host raised the awkward part of the sell-off: the market is not pricing long-term intractable inflation, so the rise in yields is coming from somewhere else — term premium, questions about Fed independence, and other ambiguous factors.
Dhingra put inflation in the background rather than the foreground. "I think inflation's sort of underlying murmur in all these conversations. It's been sticky. It's been persistent. But so has been growth, right?"
"If you look at the economic surprises, the biggest economic and the most persistent economic surprise in the last 12 months has been growth."
He gave three sources for it: the AI build-out, this year's fiscal support, and a Fed rate that has been stimulative because it has been below neutral rather than at it.
Abramowicz picked out the last one and asked whether the Fed understands it has been accommodative. Dhingra said they are probably realizing it.
His example is the Fed's own estimate of the neutral rate. On the R-star concept, he said the Fed often figures this out after the fact, uplifting the estimate once it has watched the economy do well for a while.
"In fact, if you look at the last six years since COVID, the long-term R star dot has been playing catch up with the market." The market has been there all along; the Fed's long-run dot has been trailing it.
6. Three Hikes to Six
Abramowicz's last question was the size of the cycle — a spread, with a low end and a high end.
"So I think three is, in my view, the low end. The high end would probably be six."
His precedent is the late 1990s, and the detail is where the market's attention turned. The Fed reversed three cuts with three hikes first, which he said did not seem to move the needle much — "Then they went to hike number four, five and six. And that's what got the market talking."
Bonus Insights
Abramowicz's own contribution was to isolate the strongest phrase in his answer and make him defend it — she called the accommodative line a killer line and turned it into the question of whether the Fed knows.
The host framing that produced his best answer was the observation that the bond market is not pricing intractable inflation. Dhingra did not dispute it; he replaced inflation with growth as the driver, which is a different sell-off than the one usually described.
He never gave a terminal rate, only a range of hikes and a floor on the 10-year, and twice attached the same condition to both: the build-out and the better-off consumer have to slow first.
Dhingra's bottom line is that 5% on the 10-year is a floor rather than a ceiling, because the two things that would normally stop an economy at these rates — AI capital spending and the spending of the top half of the consumer distribution — are not responding to the price of money, and the Fed will have to show a sequence of hikes before the bond market believes it.
Products, Companies & Tools Mentioned
10-year and 30-year Treasuries (The yields he says drive the economy, because mortgage rates and corporate borrowing are indexed to them; his call is 5% on the 10-year, with 5% not the ceiling)
Federal Reserve (Hiking because it is behind the curve on growth, on his account, and running an R-star estimate that has trailed the market for six years)
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