Circle has secured a $100 million investment from Binance and a five-year commercial agreement designed to increase USDC distribution, giving the stablecoin issuer another channel as it competes with Tether.

Circle said on Sept. 22 that Binance had purchased $100 million of its Class A common stock and renewed their USDC partnership for five years, with a focus on distribution in emerging markets.

The agreement builds on a relationship that began in late 2024. Analysts interviewed by CoinDesk said Binance could help Circle place USDC in front of more users, particularly in markets where dollar stablecoins play a large role in crypto trading and payments.

Kaiko data cited by CoinDesk showed the number of USDC-quoted spot markets on Binance rising from 140 when the original partnership began to 329. Monthly USDC trading volume on the exchange moved from roughly $20 billion-$40 billion before the deal to more than $80 billion in recent months.

Circle and Binance deepen their financial ties

The new arrangement goes further than distributing USDC because Binance now owns Circle stock. Circle’s SEC filing shows that Binance bought 1,237,011 Class A shares at $80.84 each. The private placement generated $100 million for Circle and closed on Sept. 17.

The purchase price represented a discount to Circle’s market price before the transaction closed. Binance retains voting rights attached to the shares but agreed to restrictions on selling, transferring, pledging or hedging them for up to two years, subject to specified exceptions.

Under the commercial agreement, Circle will pay Binance a monthly incentive calculated as a percentage of qualifying USDC held through Circle’s Modular Smart Contract Wallet infrastructure service. Binance agreed to perform activities promoting USDC on its platform.

Either company can terminate the agreement before the five-year period expires when specified conditions occur. The arrangement replaces agreements signed in November 2024 and August 2025.

As crypto.newsreported on the Binance investment, the share purchase and renewed commercial arrangement tie Binance’s financial interest more closely to USDC distribution.

Clear Street analyst Owen Lau told CoinDesk that the structure further aligns Binance and Circle, drawing a comparison with Circle’s existing relationship with Coinbase.

Binance has become a major USDC trading venue

Trading data suggests Binance was already becoming a larger source of USDC activity before the new agreement was signed.

According to Kaiko data cited by CoinDesk, Binance handled roughly $5 billion-$10 billion of USDC spot trading per day during 2026. Anastasia Melachrinos, Kaiko’s head of research, said that was around 10 to 20 times the activity recorded on many competing trading venues.

USDC trading pairs on Binance have increased sharply since the companies began working together. The platform had 39 USDC spot markets in 2021 and 140 by late 2024, before reaching 329 under the partnership.

The expansion does not mean every USDC pair remains permanently listed. Binance periodically removes individual markets when liquidity or volume no longer meets its requirements. Crypto.news reported earlier in September that BREV/USDC, COOKIE/USDC, LA/USDC and QNT/USDC were scheduled for removal following one such review.

Circle has been working with other exchanges at the same time. Its expanded partnership with OKX covers USDC trading in spot, margin and futures markets.

Circle’s expanded OKX partnership earlier this month. Eligible traders gained more access to USDC-denominated markets as Circle sought distribution beyond a single exchange.

USDC remains well behind Tether by market value

The Binance agreement comes while USDC remains the second-largest dollar stablecoin behind Tether’s USDT.

CoinGecko recorded USDC’s market capitalization at roughly $75.3 billion on Sept. 23, up from $73.6 billion on Sept. 17.

Tether remained considerably larger. CoinGecko data placed USDT’s market value at approximately $183.8 billion on Sept. 26, with daily trading volume close to $69 billion. Its market capitalization had stayed near $183 billion throughout most of September.

Gravity Team CEO Martins Benkitis told CoinDesk that Binance gives Circle an incentive and distribution route to increase USDC usage. He cautioned that USDT’s existing trading pairs, local liquidity and established user behavior make rapid changes in market share difficult.

The difference extends beyond token supply. USDT has long-established liquidity in international crypto markets and remains heavily used as a quote asset for trading. Analysts interviewed by CoinDesk said Circle’s Binance partnership could increase competitive pressure without immediately replacing those networks.

Circle has meanwhile expanded USDC’s presence through its own infrastructure. On Sept. 16, the company launched the mainnet of Arc, a blockchain using USDC for transaction fees.

The Arc launch, the network opened with institutional validators including BlackRock, Visa, Mastercard, DTCC and Standard Chartered.

Circle is building payment rails beyond exchanges

Circle’s competition for stablecoin usage now extends into payment infrastructure and cross-border settlement.

On Sept. 8, Circle announced an agreement to acquire Tazapay, a Singapore-based cross-border payment company. Circle said the transaction would add relationships with more than 60 banks and fintech companies and payout capabilities covering more than 100 markets.

The acquisition is expected to close in 2027 after regulatory approvals, including consent from the Monetary Authority of Singapore. An SEC filing shows the transaction is structured as a share purchase and remains subject to closing conditions.

Tazapay transaction is valued at $400 million in stock. Tazapay processes more than $25 billion in annualized payment volume, while stablecoins account for roughly 60% of its transaction activity, according to information released around the deal.

Circle Payments Network forms another part of the company’s payments strategy. The network connects financial institutions and payment providers using regulated stablecoins for cross-border settlement.

Binance gives Circle a different distribution route through trading accounts and users in international markets. Binance co-CEO Richard Teng said the company’s $100 million investment and five-year commitment represented what he called “long-duration conviction” in Circle and USDC.

Circle CEO Jeremy Allaire described Binance as one of the largest platforms for dollar stablecoin use and said the renewed partnership would extend USDC availability through its global user base.

Payward has expanded its financial infrastructure strategy beyond Kraken through regulated derivatives, tokenized equities, payments, banking services and technology offered to other financial companies.

CoinDesk reported on Sept. 26 that co-CEO Arjun Sethi described Payward as one financial platform built around a shared infrastructure stack. Trading through Kraken forms one of four operating pillars alongside banking, asset management and Payward Services.

The expansion comes as Payward’s revenue mix becomes less dependent on trading fees. The company reported $508 million in adjusted revenue for the second quarter of 2026, up 17% year over year. Adjusted EBITDA reached $23 million.

Total platform transaction volume fell 18% year over year to $310 billion as crypto spot activity weakened. Payward said traditional futures, equities and tokenized equities grew during the quarter. Futures daily average revenue trades rose 8%.

Asset-based and other revenue represented 60% of total revenue, compared with 55% one year earlier. Assets on the platform stood at $40 billion, while funded accounts reached a record 6.6 million.

As crypto.news reported in August, the company changed the way it defines funded accounts after expanding its operating structure. The newer measure covers accounts across Payward platforms and can count subaccounts separately.

Payward has spent billions building regulated trading infrastructure

Payward has used acquisitions to add regulated infrastructure that would take years to recreate internally. Kraken agreed in March 2025 to acquire U.S. futures brokerage NinjaTrader for $1.5 billion, bringing traditional futures trading and regulatory capabilities into the group.

NinjaTrader remained a separate operating platform after the transaction. The acquisition expanded Kraken beyond crypto markets while preserving NinjaTrader’s existing platform.

Payward followed that deal with its acquisition of Bitnomial for up to $550 million in cash and stock. The transaction added a Commodity Futures Trading Commission-regulated designated contract market, derivatives clearing organization and futures commission merchant.

Those licenses place exchange operations, clearing and brokerage services within the same regulated group. Payward said the acquisition would support its U.S. derivatives strategy.

Crypto.newsreported when the deal was announced that Bitnomial had become the first crypto-native U.S. platform to hold the three main CFTC derivatives registrations together.

Payward completed the transaction on May 1. Its second-quarter financial report said Bitnomial infrastructure subsequently supported regulated U.S. perpetual futures and spot margin products.

The company moved further into on-chain derivatives in September. Payward announced plans to offer perpetual futures using Hyperliquid’s HIP-3 infrastructure to eligible U.S. clients, subject to regulatory approval.

Under the proposed structure, Bitnomial would deploy, administer, clear and settle the contracts. NinjaTrader Clearing would carry eligible customer accounts.

In related coverage, crypto.news reported that customers would need approval from the regulated entities before gaining access to the markets.

Payward tokenized equities strategy reaches Nasdaq and LSE

Payward’s tokenized equity business has drawn partnerships with two established stock market operators.

Nasdaq announced on Sept. 10 that Nasdaq Ventures had agreed to invest $100 million in Payward. The companies are expanding their work on the Nasdaq Equity Token framework while introducing a new market surveillance agreement.

Nasdaq said the collaboration covers infrastructure for tokenized equities and markets that operate for longer periods than conventional stock trading hours. Payward would provide technology supporting distribution, trading and post-trade functions.

Nasdaq Equity Tokens are expected to launch in the second quarter of 2027. Payward was valued at $21 billion in connection with Nasdaq’s investment.

The London Stock Exchange has separately partnered with Payward on tokenized public equities. LSE plans to list xStocks on its forthcoming LSE 24 venue during 2027, subject to regulatory approval.

xStocks are tokenized representations of publicly traded shares and exchange-traded funds. Payward gained greater control over the product infrastructure through its acquisition of Backed Finance, which developed the tokenized securities platform.

Sethi told CoinDesk that partnerships with established market operators remain part of Payward’s strategy because traditional exchanges still provide regulatory and listing infrastructure developed over decades. “Trust is their currency,” he said.

Kraken has continued expanding xStocks independently of those partnerships. The company had expanded its equities business while tokenized stocks gained a larger share of real-world asset activity.

Payward Services opens its infrastructure to other companies

Payward is turning technology originally developed for Kraken into infrastructure that banks, fintech companies, brokers and other platforms can integrate.

Payward Services combines trading, custody, liquidity, funding, payments, compliance, risk management and settlement capabilities through shared integrations. At least 25 companies were developing products using the infrastructure, Sethi told CoinDesk.

The company said in its second-quarter report that its unified Payward Services API had already brought its first external partner live. Later integrations added conversions, transfers, European equities and Kraken’s request-for-quote infrastructure.

Payward has continued expanding the business through acquisitions. It closed its purchase of stablecoin payments company Reap in July, bringing payments and card issuance infrastructure into the group.

The company agreed later in July to acquire Magic Labs’ wallet infrastructure business. Crypto.news reported that the technology supports wallet infrastructure used by around 60 million users and is intended to become part of Payward Services after completion.

Payward’s newsroom shows the expansion continued through September. The company announced integrations covering Ledger, stablecoin card programs through Reap and Visa, on-chain xStocks yield and IPO access through Payward Services.

Payward keeps its IPO separate from expansion funding

Payward’s infrastructure spending has continued while its planned public listing remains on a longer timetable.

The company confidentially submitted a draft registration statement for an initial public offering to the U.S. Securities and Exchange Commission in November 2025. It has not publicly disclosed a ticker, proposed share price or number of shares.

Payward is not expected to complete an IPO before the second quarter of 2027 at the earliest. Sethi told CoinDesk that Payward does not rely on an IPO to finance its operations because the company remains profitable and can fund investments from its balance sheet. Recent capital raises have brought strategic investors including Citadel Securities and Nasdaq into the company.

Payward is pursuing another regulated component in Europe. Sethi said the company was “about to buy a bank in Europe,” without naming the target. Earlier reporting cited in the source linked the talks to a possible Lithuanian bank acquisition.

SEC staff has clarified when staking receipt tokens may be treated as digital tools rather than securities under U.S. law, alongside new answers on wrapped assets, token buybacks, and functional crypto networks.

The Securities and Exchange Commission’s Division of Corporation Finance issued the FAQs on Sep. 25 to explain parts of the agency’s March interpretation of federal securities law. The answers describe how the staff would classify certain tokens and assess an issuer’s promises to buyers; they are neither a new rule nor a Commission decision.

For staking receipts, the staff focused on what the token gives its holder. If it serves as proof of ownership of an underlying digital commodity that is not subject to an investment contract, the receipt is a digital tool under the circumstances set out in the March interpretation.

A receipt issued by a protocol-based liquid staking provider may also be classified as a digital commodity when its value is linked to the operation of a functional crypto system and market supply and demand.

When SEC staff treats a staking token as a receipt

In the FAQs, staff described a receipt as proof that a stated amount of an asset has been deposited while the holder retains ownership. It does not change the rights or benefits attached to the deposited asset, or give the holder an added financial benefit.

The issuer of a receipt also cannot use the deposited asset as its own. According to the staff, the issuer cannot transfer, lend, pledge, or otherwise put the asset to use, and the asset cannot become subject to claims by the issuer’s creditors. The explanation applies to the receipt concept used for both staking tokens and redeemable wrapped tokens in the March interpretation.

Although a holder may receive rewards earned on the underlying staked asset, the receipt token itself does not create that entitlement or set the reward amount, the SEC staff said. The distinction turns on the token’s actual rights and the way the underlying asset is held, rather than its name alone.

The agency had addressed a related activity in August 2025. As previously covered by crypto.news, its Corporation Finance staff said certain liquid staking arrangements did not involve the offer or sale of securities when users received tokens documenting ownership of staked assets. The Sep. 25 answers add detail on how those receipts fit into the token categories established by the later interpretation.

How a functional network changes the analysis

The FAQs also address a token that was previously sold as part of an investment contract. In that setting, staff looks at whether buyers can still reasonably expect an issuer to carry out the essential managerial work it promised, rather than assuming the token keeps the same legal treatment indefinitely.

After a crypto system becomes functional, work to secure, maintain, or improve it does not necessarily count as essential managerial work, according to the staff. Its answer includes software upgrades, funding development projects and efforts to help network use grow. An issuer’s promise to continue those services after functionality, on its own, would not satisfy the cited part of the Howey test, staff said.

Functionality depends in part on the promise being assessed. The staff said each issuer’s own description determines whether it has delivered the functionality or decentralization it promised buyers. The definitions in the March interpretation still govern how the SEC classifies a crypto asset, but they do not replace the terms of an issuer’s earlier representations when assessing whether its promised work has been completed.

In March, the SEC and CFTC set out a token framework that distinguished a non-security crypto asset from an investment contract associated with its sale. The interpretation also addressed staking and wrapped assets. The new staff answers deal with narrower questions raised by that framework, including what happens when responsibility for promised work changes hands.

If another party takes over an issuer’s promise to perform essential managerial work, the asset does not separate from the investment contract merely because the party responsible has changed, staff said. By comparison, once a functional network has no central party able to control its success or failure, statements by its original issuer about the network would be unlikely to create a new investment contract, according to the FAQs.

Why token buybacks and marketing remain case-specific

A buyback announcement receives different treatment depending on the network’s state and the issuer’s claims. For a functional crypto system, staff said an issuer’s announcement that it will buy back a non-security token does not amount to a promise to perform essential managerial work. Before a system is functional, however, a buyback could matter if the issuer presents it as a way to produce yield or returns for holders.

The distinction is relevant to an August SEC proposal on crypto offerings, which included a conditional path for an asset to cease being subject to an investment contract once an issuer permanently completed or stopped the essential managerial work it had promised. The proposal described possible rules for qualifying offerings; the Sep. 25 FAQs instead state the Corporation Finance staff’s answers under existing interpretations.

Staff also drew a line between describing a network’s uses and promising work that buyers may expect to produce profits. Promoting functions a system already has would generally not, on its own, be a promise of essential managerial efforts. Broad statements about possible future features would likewise be less likely to count when they make no claim about potential profit. The staff said the result depends on the facts of the communication.

For U.S. trading platforms, listing a token in a secondary market does not automatically make the platform its promoter. The FAQs say a platform would have to meet the existing definition of “promoter” in Securities Act Rule 405 for that label to apply. The SEC said the staff answers have no legal force, do not change federal securities law, and have not been approved or disapproved by the Commission.

Crypto and blockchain companies announced more than $104.2 million across eight disclosed financings from Sep. 19 to Sep. 25, 2026.

HIFI’s $37 million Series A was the largest venture round. The total also includes Forward Industries’ $25 million registered direct stock offering, which is public-company financing rather than venture capital.

Atum’s $13.5 million raise and MeshWallet’s $10 million private round put payment infrastructure among the week’s largest deals. The total is a floor because infiniFi described its new round as more than $3 million. Two other tracked investments had no disclosed amount.

The inventory draws on DropsTab’s funding table and DefiLlama’s raises database, with material deals checked against company announcements, filings, and crypto.news coverage. The total counts new financing announced during the reporting period. It excludes acquisitions, older rounds, and valuations.

HIFI raises $37 million for stablecoin infrastructure

HIFI announced a $37 million Series A on Sep. 24, led by Left Lane Capital. The company said the funding will support its stablecoin settlement platform and expansion into card issuance and tokenized capital markets. HIFI also plans to add staff and deepen its regulatory coverage.

The New York company offers payment infrastructure that connects stablecoins with conventional financial services. Its announcement cites a Visa Direct integration for payouts and a connection to the Circle Payments Network. HIFI said its platform processes more than $7 billion in annualized volume, a business measure separate from the amount raised.

Forward Industries completes $25 million stock offering

Forward Industries completed a $25 million registered direct offering to an institutional investor. Its SEC filing says the company sold 3,125,000 common shares for approximately $25 million in gross proceeds before fees and expenses. The filing does not name the buyer.

Forward said the financing is intended to expand its SOL treasury. The U.S. public company holds and stakes Solana as part of a digital-asset strategy it began in 2025. Its share sale is included in the overall financing total but is separate from the private venture rounds.

Atum launches with $13.5 million for payments network

Atum announced $13.5 million in funding as it emerged from stealth on Sep. 22. Its investors include Variant, PayPal Ventures, Abstract Ventures, Road Capital, Mirana Ventures, First Commit and Credibly Neutral.

The company is building a network to coordinate transfers across stablecoins, blockchains and other payment systems. Atum says it does not issue a currency or take custody of customer funds. It is targeting financial institutions and stablecoin card issuers. The announcement disclosed the amount and investors but did not give the financing a seed or Series A label.

MeshWallet secures $10 million for USDT wallet

TRON-based MeshWallet raised $10 million in a private round backed by private investors and small family offices. The Tallinn-based company said it will use the money to develop its self-custodial wallet and add services for retail and business users.

MeshWallet’s product lets users send TRC-20 USDT without keeping a separate TRX balance for network fees. The company did not identify an individual lead investor in the crypto.news report. Its round, together with HIFI’s and Atum’s, brought disclosed payment-related financing to $60.5 million for the week.

Funding from $6 million to $8 million

• CatchBack — $8 million seed: Foundation Capital led the collectibles marketplace’s round, with Y Combinator, Robinhood Ventures, Coinbase Ventures and the Solana Foundation participating, according to RootData. CatchBack links digital mystery packs to physical trading cards that users can trade or redeem.
• Infini — $6 million seed: The company announced the close of its round on Sep. 22. Its platform uses stablecoin settlement for accounts, payments, cards, and treasury services. DefiLlama lists Reforge, Enlight Capital, Fortwest Capital, NexGen Capital, SNZ Capital and Vernal Capital among the investors.

Funding below $5 million

• infiniFi — more than $3 million: Electric Capital led the DeFi protocol’s latest round, with New Form Capital, Generative Ventures, Fasanara Capital and others participating. The company said the financing brings its total outside funding across earlier and current rounds to more than $6 million. Only the newly announced amount is counted this week.
• functionSPACE — $1.7 million pre-seed: Maven 11 Capital led the round for an onchain pricing protocol, with Blockwall and Smape Capital participating, according to CryptoRank. DropsTab dates the round to Sep. 24.

Undisclosed strategic and seed rounds

• XStable — undisclosed investment: DefiLlama lists YZi Labs, the Sui Foundation, Taisu Ventures and CatcherVC as backers of the project, which is building onchain trading infrastructure for precious metals and foreign-exchange markets. The amount is excluded from the weekly total.
• Travix — undisclosed seed round: DefiLlama lists Amber Group as lead investor in the onchain perpetuals project. The database dates the entry to Sep. 21 and gives no amount.

NFT sales reached approximately $55.51 million over the seven days ending Sep. 26, up 57.17% from the prior seven-day period, according to a CryptoSlam dashboard captured on Sep. 26. Ethereum led blockchain sales, while CryptoPunks ranked first among collections.

According to data from CryptoSlam, seller addresses rose 39.19% to 150,410. The 39.65% increase in buyer addresses was much larger than the 5.93% rise in transactions. CryptoSlam counts addresses, so those buyer and seller figures do not establish how many individual people traded NFTs.

The NFT increase took place alongside gains in the two largest cryptocurrencies. Bitcoin traded near $83,914, up 3.60% over seven days, while Ethereum traded near $2,686, up 2.70%. CoinGecko put the total crypto market capitalization near $2.97 trillion.

Ethereum leads NFT sales with $30.33 million

Ethereum recorded approximately $30.33 million in seven-day NFT sales, a 113.52% increase. Its 19,043 buyer addresses were up 40.61%. CryptoSlam separately listed about $1.07 million in wash-trading volume for the network; that measure should not be added to its sales figure.

Polygon placed second with $7.44 million in sales, up 6.66%, and 37,499 buyer addresses, up 41.04%. Its listed wash-trading volume was far larger, at $18.50 million. CryptoSlam’s separate “Total” column combined those figures to show $25.94 million for Polygon, but that total is not the same as the network’s $7.44 million sales figure. Polygon also hosted Courtyard, the second-ranked collection by sales.

Bitcoin followed with $5.13 million in sales, up 18.33%. Its buyer addresses climbed 45.89% to 7,938, while listed wash-trading volume came to $109,667. Two Bitcoin NFTs appeared among the five largest individual sales, although Bitcoin’s overall network sales remained below Ethereum and Polygon.

Base ranked fourth with $3.30 million in sales, up 87.59%, and 2,934 buyer addresses, up 26.30%. Its listed wash-trading volume reached $4.80 million. Beezie, a Base collection, accounted for $1.69 million in sales, including the week’s largest listed individual trade.

BNB Chain completed the top five at $2.66 million in sales, up 2.76%, with 15,000 buyer addresses. Immutable followed closely with $2.39 million, up 32.70%, while Solana recorded $2.03 million, up 17.25%. The six leading chains from Ethereum through Immutable accounted for about $51.23 million in sales, most of the $55.51 million global figure.

CryptoPunks tops weekly NFT collection sales

Ethereum-based CryptoPunks ranked first among collections with $8.24 million in sales, up 1,066.53% from the prior period. CryptoSlam recorded 85 transactions, 62 buyer addresses and 55 seller addresses. Transactions rose 844.44%, while the buyer-address count increased 520%.

Courtyard, on Polygon, ranked second with $6.56 million in sales, up 6.67%. Its 111,471 transactions were down 7.54%, and its 17,014 buyer addresses declined 14.29%. The collection’s sales increase therefore came alongside fewer recorded transactions and buyer addresses.

Credits, an Ethereum collection, placed third at $5.18 million. CryptoSlam showed no week-over-week change in its displayed sales, 57,288 transactions or 4,124 buyer addresses. Another Ethereum collection, Argonauts, followed with $1.97 million in sales, down 28.61%, across 952 transactions.

Base-based Beezie ranked fifth with $1.69 million in sales, up 176.70%, across 7,367 transactions and eight buyer addresses. Its $1 million sale of Beezie #4365 represented about 59% of the collection’s weekly sales. That concentration makes the collection’s increase a poor measure of trading across all its items.

Bored Ape Yacht Club placed sixth with $1.49 million in sales, up 213.39%, from 79 transactions and 48 buyer addresses. Immutable-based Guild of Guardians Heroes ranked seventh with $1.28 million, up 31.93%, from 870 transactions and 530 buyer addresses.

Beezie leads high-value NFT sales with $1 million trade

CryptoSlam listed Beezie #4365 as the largest individual sale at $1 million, settled in 1 million USDC on Base about three days before the dashboard capture. The transaction alone represented roughly 1.8% of global seven-day NFT sales.

The next two listed sales came from $X@AI BRC-20 NFTs on Bitcoin. One sold for approximately $519,364, or 5.9999 BTC, about three days before the capture. Another sold for approximately $409,140, or 5 BTC, about seven days before it. Together, the two transactions accounted for about $928,504 of Bitcoin’s $5.13 million weekly NFT sales.

Alchemix V3 Transmuter #229 ranked fourth at approximately $398,081, settled in 149.95 WETH on Ethereum about two days before the capture.

The fifth-largest listed sale was Cardano Warriors – Islands #asset1sq7qkdve0ngmgllap7cw2… at approximately $378,237, settled in 1,651,099.8227 ADA on Cardano about six days before the capture. These five transactions totaled about $2.70 million, or roughly 4.9% of CryptoSlam’s global seven-day sales figure.

Investors were rattled this week as the benchmark 10-year Treasury yield soared to its highest level since 2007, but sticky inflation is just one of the factors behind this latest surge.

The key 10-year Treasury yield, which influences mortgages, leapt to 5.23% on Friday for its highest level since 2007. It was the latest leg higher for the benchmark yield, which earlier this month was trading just below 4.8%. Bond yields and prices move inversely to one another.

The 10-year yield’s rapid climb above 5% shows how quickly investors’ expectations have shifted toward additional tightening from the Federal Reserve in light of stubborn inflation. Fed funds futures trading shows a 64% likelihood of a rate hike in October, according to the CME FedWatch tool.

Indeed, the University of Michigan’s consumer sentiment index showed that year-ahead inflation expectations leapt to 4.6% in September, rising from 4% in August and marking the highest reading since June.

When it comes to the runup in yields, stubborn inflation and the market’s growing anticipation for more rate hikes only tell part of the story, according to Thierry Wizman, global FX and rates strategist at Macquarie Group. 

“I think this year it has more to do with the bond issuance than the inflation story,” he told CNBC.

Wizman said yields at these levels are not themselves unusual, particularly because they are not being accompanied by extreme inflation expectations or an aggressively tightening Fed.

“We don’t have a Federal Reserve that’s tightening aggressively, so a lot of things look pretty normal. The thing that’s abnormal is that we’re in the midst of a very strong investment cycle,” he said. 

Heavy bond issuance

The federal government is issuing debt to finance a large deficit, while companies are borrowing heavily to fund artificial intelligence infrastructure.

Wizman said it is that combination that has increased bond supply enough to put upward pressure on yields.

The AI spending boom is adding another source of bond supply to compete with Treasuries.

Vanguard estimates that Alphabet, Amazon, Meta Platforms, Microsoft and Oracle issued about $132 billion of debt through July, up sharply from the roughly $35 billion annual average between 2020 and 2024. Broader AI-related debt issuance could reach $300 billion to $570 billion this year as companies across the data-center, semiconductor and utility ecosystem borrow to finance the buildout. 

At the same time, higher yields can weigh down stocks by raising borrowing costs for companies and making bonds seem more attractive to income-seeking investors.

Wizman said the capital-spending plans of hyperscalers and their suppliers are likely to keep bond issuance elevated through this year and into next year.

“So these yields could go higher,” he said.