US Treasury yields are rising, and the effects are already reaching Europe. According to HBCU Buzz, the 10-year Treasury note stood at 5.24% on Sept. 28, its highest level since June 2007 on the Treasury Department's daily yield curve.
German yields have followed the move, and the euro has weakened against the dollar. The publication's conclusion is that higher US bond yields already affect the EU. How far the shock spreads, however, depends largely on whether it leads to an American recession, the scenario that would most reduce European exports to the United States.
On that question, the publication says the available evidence still points against a recession. The transmission from Treasuries to borrowing costs is direct in some areas. The rate on each year's new federal Direct student loans is set by the high yield at the last 10-year Treasury auction before June 1, plus a fixed add-on, according to the Education Department's annual notice in the Federal Register.
The May 12 auction cleared at 4.468%, producing fixed rates of 6.52% for undergraduates, 8.07% for graduate unsubsidized loans and 9.07% for PLUS loans. The undergraduate rate was 6.39% a year earlier. The publication cites the Postsecondary National Policy Institute's HBCU fact sheet, which reports that 64.3% of HBCU students received a federal student loan in 2019-20, compared with 34.5% of all students.
German yields have also climbed. Germany's 10-year yield rose from 2.96% on Jan. 2 to 3.69% on Sept.
28, according to the Bundesbank's daily estimate, a gain of 0.73 percentage point, or about seven-tenths of the 1.05-point rise in the US 10-year note over the same period. The European Central Bank raised its deposit rate to 2.25% on June 11 and to 2.50% in September, its first increases since 2023, after the Middle East conflict pushed oil and gas prices higher. Its September statement said inflation “is set to remain well above target for an extended period.” The ECB's September Economic Bulletin described the summer's move as “a synchronised increase in global bond yields.” ING analysts Padhraic Garvey and Michiel Tukker wrote in a Rates Spark note that the rise in euro rates “has been predominantly driven by external forces,” with US markets leading the push in longer-dated real rates.
ECB staff also found in a box in the same bulletin that a surprise Fed tightening tightens euro-area financial conditions mostly through stock valuations and corporate bond spreads, “partly offset by the exchange rate channel.” The currency move has been mixed for American users of European services. The euro fetched $1.1378 at the ECB's reference rate on Sept. 28, about 5% below its 2026 high of $1.1974 on Jan.
28. On that basis, $1,000 bought about €879 rather than €835. Over twelve months, however, the dollar gained roughly 3%, close to the 3.2% annual inflation rate Eurostat reported for the euro area in August.
Measured in dollars, European costs are broadly where they were a year earlier. For Europe, a weaker euro helps exporters, and an ECB staff scenario with the euro at $1.14 next year and $1.12 the year after raised growth and inflation by about 0.1 percentage point each year. Because oil is priced in dollars, a weaker euro also makes energy more expensive for Europe.
Brent crude settled at $103.08 a barrel on Sept. 23, according to CNBC. Recession risk remains the central variable.
The EU exported €554.0 billion of goods to the United States in 2025 and recorded a €199.6 billion surplus, according to Eurostat. On Sept. 28 the 10-year Treasury yield was 0.96 percentage point above the three-month bill, an upward-sloping curve rather than an inversion.
The New York Fed's model, which converts the monthly average of that spread into a probability, put the chance of a recession twelve months ahead at 13.9% in its latest reading. The Philadelphia Fed's third-quarter survey of 32 professional forecasters put the probability of GDP contracting at 13.3% for the current quarter and 20.0% for the next. On Kalshi, a contract paying $1 if the US has a recession this year was quoted at 5 to 6 cents on Sept.
29, and the contract for next year at 21 to 22 cents, an implied probability of roughly one in five. The publication notes that the market price moves daily and can react sharply to headlines. GamingToday reported that Kalshi's contract fell 9.2 points in a single spring weekend after de-escalation news.
The publication also points out that the contract settles on two consecutive quarters of falling GDP, a rule that differs from the National Bureau of Economic Research's dating method. The NBER has not dated a recession since the 2020 pandemic slump, despite first estimates showing two shrinking quarters in 2022. The yield curve has also produced false signals: it stayed inverted for 25 straight months from late 2022, and in 2023 the New York Fed's model put the odds of a recession a year later near 71%, a downturn that did not occur.
For HBCUs, the most persistent cost may come through the federal HBCU Capital Financing Program, which provides low-cost financing for classrooms, libraries, laboratories and dormitories. Rice Capital Access issues the bonds, the Education Department guarantees them, and the US Treasury is the only buyer. According to Rice, loans price at 0.225 percentage point over the Treasury security of matching term and are often fixed for their full life.
The 30-year Treasury yield rose from 4.86% on Jan. 2 to 5.56% on Sept. 28.
The publication estimates that a 30-year loan priced off the 30-year bond would carry roughly $175,000 more in first-year interest on $25 million than a loan locked in at the start of the year. The newest loan on the Education Department's list is a 30-year fixed-rate loan of $25 million to Edward Waters University for a new living-learning center. The program has 36 loans outstanding to 20 institutions, with a balance of about $1.72 billion, and Congress provided a $20.15 million subsidy to support $500 million of new loans in fiscal 2026.
The publication also cites a study by researchers from Notre Dame, Drexel, Duke and the University of Washington, which found that HBCUs paid about 20% more in underwriting fees on tax-exempt college bond deals from 1988 to 2010 than comparable non-HBCUs. The next policy tests are close at hand. The Fed meets on Oct.
28 and the ECB the following day, with further meetings on Dec. 9 and Dec. 17.
ING, according to the publication, now expects one more increase from each bank, most likely at the year-end meetings, and describes the ECB's move as an “insurance rate hike.” For US student borrowers, the next key date is the spring 2027 auction. If the 10-year note clears near its Sept. 28 level, the undergraduate rate would rise to 7.29%, the highest since the formula took effect in 2013, though still below the 8.25% cap.
The 10-year yielded 4.19% on Jan. 2. Source: HBCU Buzz, “Will the Higher US Bond Yields Affect the EU?” (hbcubuzz.com).
Other sources cited in the original article include the US Treasury Department, the Education Department, the Bundesbank, the European Central Bank, ING, Eurostat, the New York Fed, the Philadelphia Fed, Kalshi, CNBC, the National Bureau of Economic Research, Rice Capital Access and the Institute of International Education.
Source: hbcubuzz.com