Photo: Sealy j / Wikimedia Commons / CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)
30-year US Treasuries yield hits two-decade high amid debt concerns
Rising government debt, heavy Treasury issuance and borrowing tied to the AI infrastructure boom are putting renewed pressure on long term US yields.
The yield on the 30 year US Treasury climbed to 5.29% on Monday, reaching its highest level since 2007 as investors demanded greater compensation for holding long term government debt.
The yield rose about three basis points during the session and is approaching the 5.44% peak reached in 2007 during the early stages of the global financial crisis. The move continues a selloff that has pushed borrowing costs higher across global bond markets.
Concerns over rising US government debt, persistent inflation and heavy issuance of long dated bonds have weighed on Treasuries. A surge in corporate borrowing to finance artificial intelligence infrastructure has added another source of long term debt supply, according to Bloomberg and Reuters.
The pressure was visible at last week’s Treasury auctions. The government sold $25 billion of 30 year bonds at a 5.216% yield, the highest financing cost for an auction of that maturity since 2001. The preceding 10 year auction also produced the highest financing cost since 2007.
Long term yields are rising even as recent economic data has reduced expectations for another immediate Federal Reserve rate increase.
Macro, rates, and crypto—what moved markets and what matters next.
Daily. Free. Join 34,000+ readers across crypto, finance, and policy.
US retail sales fell 0.6% in July, their largest decline in more than a year, while employers shed 23,000 jobs during the month. Consumer inflation also eased to 3.4% in July, though it remains well above the Fed’s 2% target.
The conflicting forces have produced a sharp steepening of the Treasury yield curve. The 30 year yield has risen more than 13 basis points in August, while the two year yield has fallen about 12 basis points as traders reduce expectations for near term Fed tightening.
The divergence suggests investors are becoming less concerned about immediate monetary policy tightening while demanding a larger premium to hold long dated debt amid fiscal, inflation and supply concerns.