Greg Peters says nominal GDP growth is running about 160 basis points ahead of the 10-year Treasury yield, well past the long-term average gap of 100 basis points, and that alone argues for yields to keep repricing higher.
The only thing that reliably pushes yields lower, in his view, isn't on anyone's wish list.
"The only version that I can see driving bond yields lower would be a good old-fashioned recession."
Peters is co-chief investment officer of PGIM Credit.
I listened to the full segment so you can skip it.
Here are the 3 takeaways that matter.
👤 Guest: Greg Peters, co-chief investment officer of PGIM Credit
🎙️ Hosts: Tom Keene and Paul Sweeney, who anchor this edition of Bloomberg Surveillance
📰 Published: 10 September 2026 on the Bloomberg Surveillance YouTube channel
🔴 YouTube | ⏱️ 36 min
Key Takeaways
Nominal GDP growth is running 160 basis points ahead of the 10-year yield, against a long-run average gap of 100bps
Peters reads the difference as room for continued repricing rather than a reason yields should fall
Sovereign debt issuance and AI build-out are two price-insensitive borrowers competing for the same capital
Both have to come to market regardless of the rate, which he says is a dynamic the bond market hasn't seen in a very long time
A CPI print near 0.3% would be the signal that tips the Fed toward a hike
The market is already pricing roughly a 60% probability, and Peters says inflation is "stuck in the system" beyond just energy
1. The 160-Basis-Point Gap
Asked what's driving Treasury yields higher, with the 10-year up another four basis points to 4.88% and the 30-year at 5.32%, Peters pointed to a metric he said the market had forgotten.
It's not one factor. "It's a repricing of a lot of different factors, actually. I think many observers like to point to a single factor, and I don't think it is a single factor."
The metric is nominal growth versus the Treasury yield. "A key driver, I think, one end is this strong nominal growth. And I think that is, something that market participants forgot, right? And now, this cheap and simple metric that has been forgotten, if you just think about the growth, nominal GDP growth versus the Treasury yield, we're in an area that suggests that maybe there's still room for yields to kind of match that. nominal growth. It's about 160 basis points apart now. The minimum is decidedly negative, but the long-term average is 100 basis points. So I think there's scope for continued repricing here."
He does not think 5% on the 10-year is a stretch. "Definitely possible, quite plausible in fact." Asked what would reverse the move instead: "The only version that I can see driving bond yields lower would be a good old-fashioned recession. And I don't think that is something that consumers and investors want. So I do believe we're in this more normalized bond yield environment. I think the biases for yields that push higher, not lower. And I think this is the regime that we're in. I think it's quite normal, actually."
2. Two Price-Insensitive Buyers
Asked whether AI-related issuance is crowding out the investment-grade bond market, Peters agreed without qualification.
"100%, it's a thing. There is a competition for capital in ways that we haven't seen in a very long time."
The mechanism is two borrower types that both have to show up regardless of price. "The critical aspect of that analysis is that these are two borrower bases. that are price insensitive. So on one end, you have the sovereign bond debt market, which is actually slated to see a lot more supply in the coming years. So this is a lull, by the way. So this is a story that has yet to unfold. But these sovereign issuers have to come to the market, right? They have to fund themselves. And then on the other side, you have these hyperscalers, AI build-out, that's largely price insensitive."
AI is also directly lifting growth. With about a minute left before the bell, Peters said: "I think we're in a very strong growth environment. There's a lot of own goals, a lot of things working against kind of the environment. But speaking of AI, that's a big contributor to growth. That's, one, one and a half percent of GDP. That's also driving the wealth effect, which is, contributing as well."
3. The 0.3% CPI Trigger
Peters returned after the August PPI print — final demand up 0.4% month over month, core PPI up 4.6% year over year — to discuss what it means for tomorrow's CPI and the Fed.
His read on inflation is unambiguous. "Everywhere I look, I see inflation stuck in the system. I think we're well above trend here or target. This is another reading that strongly suggests that we're well away from target, even excluding the more volatile measures, you're above target. And so I think the Fed has to start paying attention here."
He pushed back on how closely the market is parsing the number. "What's interesting post the Waller speech is that all eyes are focused on the CPI. And you hear investors talking about out two decimal places. So I think that's too cute by a half, of course. But, as far as I can tell, inflation is in the system. It's not just energy driving it. And I think the Fed will have to respond."
The market has it close to a coin flip. "It's an open question. The market's definitely hedging its bets about a 60% probability. It is highly data dependent. This is probably the most consequential CPI print or prediction. market reading of the CPI print in quite some time."
His own trigger is specific. "If you get anything close to kind of 0.3, I think that's a signal that the Fed moves."
Bonus Insights
This is Peters's own segment of a longer Bloomberg Surveillance episode that also carried separate interviews with Tina Fordham on geopolitics, Citi's Heath Terry on AI infrastructure and Yacktman's Molly Pieroni on value investing, each written up on its own
Peters's bottom line is that the bond market's repricing is a normal response to a growth and issuance backdrop the Fed has not caught up to, and that tomorrow's CPI print is the near-term test of whether it has to.
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