Forget Utility Dividends. Kevin Warsh Just Made the 30-Year Treasury a Better Income Play

"Each is leveraged, capex-hungry, and trades partly as a bond proxy. With Core PCE still drifting higher, the 10-year at 4.46%, and the 30-year at 5.02%, balance-sheet runoff keeps tightening work in motion even with the Fed funds upper bound at 3.75%. Warsh has shown no appetite to support the long end if yields spike, which is the core problem."

"The buy case rests on power demand with a tailwind. NextEra's 33 GW backlog and 8%-plus long-term EPS CAGR target through 2032, Xcel's 1,900 MW Google data center agreement in Minnesota, and Dominion's Loudoun County hyperscaler exposure all point to multi-year volume growth prior cycles never offered. Eversource is funding a $26.5 billion five-year capital plan against a rate base scaling toward $49.3 billion by 2030, and WEC delivered its 23rd consecutive annual dividend increase."

"Bears focus on the widening gap between utility yields and risk-free paper. NEE pays 2.46% against a 30-year Treasury at 5.02%, and the curve is steepening on the long end. Every name absorbs rising interest expense. Dominion's Q1 interest charges climbed to $561 million from $481 million while its diluted share count moved from 852.2 million to 880.1 million, a textbook case of capex funded with equity and debt at higher cost."

Rate-sensitive regulated utilities are described as leveraged and capex-heavy, trading partly like bond proxies. With Core PCE still rising and long-term Treasury yields elevated, balance-sheet runoff continues tightening financial conditions even if the Fed funds upper bound is 3.75%. The bearish view centers on the lack of support for the long end if yields spike, which would increase interest expense across these companies. The bullish view emphasizes multi-year power demand growth, including large backlogs, data center load growth, hyperscaler exposure, and substantial capital plans, alongside regulated returns and dividend growth. The debate also focuses on utility yield spreads versus Treasuries widening as the long end steepens.

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