Key takeaways:
- The 30-year U.S. Treasury yield reached 5.3% this week, its highest level since 2007, while the 10-year yield rose to 4.7%.
- The Treasury Department said it would increase long-term bond buybacks from $2 billion to at least $4 billion to add liquidity to the market.
- Higher yields could raise costs for mortgage and auto borrowers, while also lifting returns on CDs and high-yield savings accounts.
A sharp sell-off in government bonds has pushed long-term U.S. borrowing costs to levels not seen since before the financial crisis, threatening higher mortgage, car loan and business borrowing rates while adding pressure to heavily indebted governments around the world.
The yield on the 30-year U.S. Treasury reached 5.3% earlier this week, its highest level since 2007, while the 10-year Treasury yield, a benchmark that influences mortgage rates, rose to 4.7% from 4.2% at the start of the year. Bond yields rise when prices fall, and higher yields typically reflect investors demanding greater compensation for risks such as inflation, instability or rising debt.
“Bond markets are sending an equally loud signal,” Nigel Green, chief executive of financial consultancy deVere Group, said in an email Wednesday. “30-year yields at their highest since before the financial crisis are not a footnote to the equity story. They’re a warning about the true cost of government borrowing.”
The turmoil has been driven by several forces. The U.S. national debt has surpassed $40 trillion, according to Treasury Department data released Wednesday, adding to concerns about government borrowing. Instability in the Middle East has also weighed on investors. CBS News reported that yields moved higher Monday after a 60-day ceasefire between the U.S. and Iran ended without a clear resolution, while The Guardian said anxiety over Donald Trump’s handling of the economy and concern that the war with Iran is driving up inflation have contributed to the sell-off.
Higher oil prices tied to the conflict have added to inflation worries. Inflation eased in June and July after hitting a three-year high, but it remains above the Federal Reserve’s 2% target.
The sell-off has spread beyond the United States. The Guardian reported that rising U.S. borrowing costs have dragged yields higher in other major economies, with U.K. 10-year bond rates close to their highest since 2008, U.K. 30-year rates near 1998 levels, German borrowing costs at 2011 levels, French rates at a 16-year peak and Japanese borrowing costs at their highest since 1996.
The Treasury Department moved Wednesday to calm the market by announcing it would double the size of its bond buybacks from $2 billion to “at least $4 billion,” focusing on longer-term bonds with maturities of 10 to 20 years and 20 to 30 years. CBS News reported that yields dropped after the announcement but remained elevated. The Guardian reported that Treasury Secretary Scott Bessent’s intervention helped push yields down, but that the impact was temporary and yields were rising again Thursday.
“While long-term government bond yields have dropped back a little today, their recent surge suggests investors are losing patience with fiscal profligacy,” Jonas Goltermann, chief market economist at Capital Economics, said in a research note Wednesday.
Corporate borrowing is another factor. Lucas Baynes, senior investment strategist at Vanguard, said major technology companies are increasingly issuing debt to finance artificial intelligence expansion. The five major hyperscalers — Alphabet, Amazon, Meta, Microsoft and Oracle — issued $93 billion in debt last year, compared with an average of about $35 billion per year between 2020 and 2024, according to Baynes.
For consumers, higher bond yields can mean higher borrowing costs across the economy. Kara Ng, senior economist at Zillow Home Loans, said the Treasury’s buyback effort may offer some relief, but the pressures behind the rise in yields are unlikely to disappear quickly. “For mortgage borrowers, that means rates may be elevated for longer,” she said.
Savers may benefit. Matt Schulz, chief consumer finance analyst at LendingTree, said higher yields can be “great news for savers because yields on CDs, high-yield savings accounts and other products rise, too.” But he urged borrowers to compare offers from multiple lenders. “If you don’t take the time to shop around, you can end up paying thousands of dollars more than you need to over the life of the loan,” he said.
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