Apollo Global Management’s Zelter forecasts US Treasury yield between 4.25% and 5.5%

Jim Zelter, president of Apollo Global Management, expects the 10-year US Treasury yield to settle into a range of 4.25% to 5.5% for an extended period. That’s not the kind of forecast that sends anyone running for the exits, but it does represent a fundamental departure from the sub-3% world investors got comfortable with over the past decade.

Why rates stay elevated

Deglobalization tops the list. As supply chains reshore and trade patterns fragment, the cost of doing business globally rises. That feeds into persistent inflation, which in turn keeps the Federal Reserve from cutting rates as aggressively as markets might hope.

Then there’s the fiscal picture. The US government continues to run substantial deficits, flooding the market with Treasury supply at a time when foreign buyers have become less reliable.

And layered on top of all of that is the AI investment boom. Major tech companies are pouring capital into data centers, chips, and infrastructure at a pace that demands enormous financing. Zelter has noted that investment-grade corporate debt sales could actually outpace net US Treasury issuance.

What this means for Apollo’s business

Apollo’s credit origination business has been generating spreads of 280 to 350 basis points over Treasuries in recent quarters. When the base rate is 4.5% and you’re adding 300 basis points on top, you’re looking at returns in the high single digits before leverage.

Apollo’s chief economist, Torsten Slok, has reinforced this view. Slok has highlighted that long-term Treasuries are likely to see yields exceed traditional expectations, driven by the cocktail of macroeconomic uncertainties currently in play.

The corporate debt wave

One of the more striking elements of Zelter’s outlook is the prediction that investment-grade corporate debt issuance will surpass net US Treasury issuance. Large technology companies building out AI infrastructure need financing measured in the hundreds of billions. Microsoft, Google, Amazon, and Meta have all signaled massive capital expenditure plans. Much of that spending gets funded through debt markets.

What investors should watch

Some projections within Apollo’s research suggest yields could push past 5.2% by mid-2026 if fiscal uncertainties deepen or external pressures intensify.

The risk is that rates move even higher than the projected range. A fiscal crisis, an inflation resurgence, or a sudden loss of confidence in US government debt could push the 10-year well past 5.5%.