U.S. Treasury yields hit 25‑year highs as the national debt approaches $40 trillion, sparking fresh concerns over fiscal sustainability.
U.S. Treasury Yields Spike as Debt Nears Record
The Treasury market roiled this week, with 10‑year yields climbing to 4.683% — the highest level in 19 years — and 30‑year yields reaching 5.216%, a 25‑year peak.
Analysts say the surge reflects record‑size deficits and a $40 trillion debt ceiling that is closing in on the size of the U.S. economy for the first time since World War II.
“The appetite for Treasurys remains strong; it’s just a question of yield,” said Jim Barnes, director of fixed income at Bryn Mawr Trust, in a Reuters report.
Debt Service Costs Threaten Consumers
Higher Treasury yields push up mortgage rates, which move in lockstep with the 10‑year note, making home purchases more expensive and slowing construction activity.
Auto loans, fixed‑rate consumer credit and other borrowing costs also rise, though the pass‑through to credit cards is tighter, as those rates track bank prime rates influenced by Federal Reserve policy.
Fiscal Outlook Remains Aggressive
The Congressional Budget Office projects a $2.1 trillion budget deficit for the current fiscal year and net interest costs exceeding $1 trillion by fiscal 2026, representing 3.3% of GDP and nearly 14% of federal spending.
Investor demand for Treasurys stayed steady despite the higher yields, with no sign that “bond vigilantes” are actively dumping debt, according to market analysts.
Yields on U.S. debt now exceed those of other developed nations such as Japan, reinforcing demand for risk‑free Treasurys.
If deficits continue to outpace revenue, the national debt could surpass World War II levels, with interest expense climbing to $2.1 trillion annually by 2036, or 4.6% of GDP and 19% of federal spending.
Reuters contributed to this report.
