Topline
Long-term Treasury yields hit their highest level since the global financial crisis in 2007 on Tuesday, highlighting broader investor concerns about inflation and fiscal policy in the U.S., as some analysts anticipate a steeper selloff for bonds.
The U.S. national debt approached $39 trillion as analysts warned about long-term inflation.
Copyright 2020 The Associated Press. All rights reserved.
Key Facts
Yields on 30-year U.S. Treasury notes rose just over 5.19% as of Tuesday morning, the highest level for the long-term bonds since June 2007, while 10-year yields—a gauge for mortgage rates, auto loans and credit card debt—climbed to 4.68%, their highest level since January 2025.
A survey of global hedge fund managers published by Bank of America on Tuesday found that 62% of respondents believe 30-year yields will hit 6%, potentially matching their highest level since 2007, as 40% of managers anticipated a further surge in inflation.
Ajay Rajahdyaksha, Barclays’ global chairman of research, wrote Monday the U.S. debt was rising faster than its economic growth, inflation is expected to be higher or more volatile and there’s “no political will for fiscal reform,” adding investors are not motivated to purchase long-term bonds.
Guneet Dhingra, head of U.S. rates strategy at BNP Paribas, told Reuters that 30-year yields lost their projected ceiling after crossing the 5% threshold: “Now that we have no anchor, what stops bond yields from going up in a world of high inflation, ever-rising deficits and global bond yield pressure?”
The higher rates pulled down the broader stock market on Tuesday: The Dow Jones Industrial Average dropped roughly 121 points, or 0.2%, while the S&P 500 and Nasdaq fell 0.7% and 1.2%, respectively.
Big Number
$38.9 trillion. That’s the U.S. national debt as of May 15, marking a $2.7 trillion increase over the last year, according to Treasury Department data.
What To Watch For
The Federal Reserve’s next interest rate adjustment will likely be a hike, according to CME Group’s FedWatch tool. Odds jump to 12.7% during the central bank’s policymaking meeting in July, before steadily rising to combined odds of 59.1% by December, with the highest odds (41.6%) for a quarter-point hike to between 3.75% and 4%. Inflation has settled above the Fed’s 2% target rate and hit 3.8% in April, the highest annual growth rate since May 2023, as rising consumer prices are expected to keep fiscal policymakers from cutting interest rates. Expectations of higher interest rates tend to increase short-term yields, such as two-year yields, while 10- or 30-year yields are influenced by projections of future rates, inflation, economic growth, and investor demand for long-term debt.
Key Background
Soaring energy and oil prices fueled a surge in inflation, which has sparked a selloff across the global bond market. JPMorgan CEO Jamie Dimon warned that an increase in global government debt levels could trigger a bond market crisis, suggesting the “level of things that are adding to the risk column are high, like geopolitics, oil and government deficits.” As long-term treasury yields have surged in the U.S., similar yields in the U.K. have approached 6%, and Germany’s long-term borrowing rate is at a 15-year high.