Short-term borrowing costs for U.S. Treasuries have risen sharply as investors use newly issued two- and five-year notes to establish short positions, increasing demand to borrow those specific securities in the repo market (short-term collateralized lending). The two-year yield rose 7 basis points on September 18 to 4.74%, its highest level since mid-2024, while 10-year yields reached levels last seen in 2007. A JPMorgan client survey for the week ending September 14 found Treasury short positions increased 10 percentage points to 19% of respondents, the largest weekly rise since tracking began in 2019. Net long positioning fell to its lowest level since May, while neutral holdings declined from 56% to 48%. Markets had priced in more than a 90% probability of a 25-basis-point Federal Reserve rate hike at the September 16 meeting after new inflation data and oil-price increases linked to geopolitical pressures, including tensions stemming from the Iran conflict. Elevated repo costs increase the expense of short trades but have not stopped positioning from growing, suggesting strong conviction that yields will continue rising. Higher Treasury yields also raise borrowing costs across corporate credit, mortgages, auto loans and equity markets.