Wall Street is having its best year on record, and bond yields are doing their best to spoil it. The U.S. securities industry hauled in $45.9 billion in profits in the first half of 2026, up 51.3% from a year earlier, according to a report released Tuesday by New York State Comptroller Thomas P. DiNapoli. If the pace holds, full-year profits could exceed $90 billion — shattering the record $65.1 billion set in 2025 and even surpassing the inflation-adjusted peak of 2009.
The profit surge has many parents: a revival in dealmaking, strong trading revenue fueled by market volatility, resilient loan growth, and a resurgent IPO market. Underwriting revenues skyrocketed 68% in the first half, while global mergers and acquisitions hit $2.8 trillion — the highest half-year total on record. "Despite geopolitical tensions and economic uncertainty, the industry has remained resilient," DiNapoli said in a statement.
The windfall is flowing straight into public coffers. The industry contributed at least $7.8 billion to New York City's budget in fiscal year 2026, up 15.8% from a year ago, and $26.3 billion to state coffers, up 28.5%. The sector now accounts for roughly 19% of the city's entire economic output. The good times also showed up in paychecks: the average Wall Street salary in the city soared 11.1% to $561,770 in 2025, the bonus pool expanded 9% to a record $49.2 billion, and securities employment in the city hit a record 207,400 after 7,000 jobs were added.
Artificial intelligence investment is the through-line. Big tech companies including Alphabet, Amazon and Microsoft have issued more than $200 billion in bonds this year to fund AI infrastructure, and Morgan Stanley forecasts AI-related corporate bond issuance will more than double to $570 billion in 2026. That borrowing spree feeds underwriting desks, trading floors and deal pipelines alike. Treasury Secretary Scott Bessent has downplayed fears of an AI asset bubble, arguing that the yield moves reflect stronger economic activity and genuine new capital demand rather than fiscal risk — and noting that the rate pressure is global, not specific to the United States.
The catch: the benchmark 10-year Treasury yield touched 5.35% on Monday, its highest level since 2002, with the 30-year yield briefly reaching 5.70%. DiNapoli's report warned that the rise in rates "may dampen profitability" if dealmaking slows or firms' interest liabilities rise significantly. Surging yields push up borrowing costs across the economy, from mortgages to auto loans, weigh on economic activity, and make stocks relatively less attractive — a direct threat to the hot IPO and dealmaking market that is driving Wall Street's record run.
The next few weeks will test the rally. Third-quarter earnings season kicks off next week, with Goldman Sachs estimating consensus forecasts of 27% S&P 500 earnings growth last quarter — more than half of it from companies benefiting from AI infrastructure spending. The Federal Reserve hiked interest rates last month for the first time in three years to cool above-target inflation, and minutes from that meeting, due Wednesday, could signal whether another increase is coming in October or December. Markets currently expect the Fed to hold later this month, but yields keep climbing. As one investment chief put it this week: the interest-rate story is the biggest headwind — the market may not tank, but a meaningful rally in the face of 5%-plus yields will be a struggle.