The yield on the 10-year U.S. Treasury bond climbed to a 24-year high during Thursday trading, signaling higher borrowing costs ahead for American families.
The 10-year yield topped 5.34% early Thursday morning, its highest level since April 2002. That month, the yield hit a closing peak of 5.48%.
By midmorning Thursday, the yield had slipped to roughly 5.32%. Even so, it remained up about 3 basis points from Wednesday’s close.
The surge has been building for months. The 10-year yield has continued to climb over the last seven months after closing at 3.96% on Feb. 27, the day before the U.S. and Israel launched the war with Iran.
The conflict in the Middle East has driven up energy prices as Iran has restricted shipping in the Strait of Hormuz. Those higher energy costs have fueled rising inflation here at home.
Annual inflation, as measured by the personal consumption expenditures price index, came in at 3.4% in August, the Bureau of Economic Analysis reported Wednesday.
Drivers are feeling the pain at the pump. The national average price for a gallon of regular gas stood at roughly $4.41 on Thursday, according to AAA. That is about $1.43 higher than two days before the conflict began.
Rising government debt is also pushing bond yields higher around the world.
The U.S. national debt crossed $40 trillion in August and now sits at roughly $40.1 trillion.
The 30-year Treasury bond, which pays a higher interest rate than shorter-term securities, also moved higher Thursday.
As of midmorning, the 30-year yield was trading at about 5.67%, up roughly 3 basis points from Wednesday’s close. That also marks the 30-year note’s highest point since April 2002.
The booming demand for artificial intelligence is another factor behind rising bond yields. Growing demand for AI data centers and models has drawn attention from Federal Reserve officials, who have cited it as putting upward pressure on prices.
Fed board member Lisa Cook addressed the issue Monday at a technology conference in Oakland, California.
“Data center investment relies on inputs, like construction labor and energy, that are broadly used in many sectors in the economy,” Cook said. “As a result, increased AI investment could introduce price pressure to those other sectors.”
The sell-off in the U.S. bond market is driving up borrowing costs across the board, and homebuyers are among those taking the hit.
The average 30-year mortgage rate reached 7.03% last week, according to Freddie Mac. That marks the first time the rate has topped 7% since January 2025.
For Americans, the combination of climbing Treasury yields, elevated inflation, higher gas prices and rising mortgage rates means borrowing is getting more expensive.
The 10-year yield’s climb from 3.96% in late February to above 5.34% on Thursday reflects the pressures weighing on the market, from the war with Iran and its effect on energy prices to the soaring national debt and the rapid expansion of artificial intelligence.
Both the 10-year and 30-year yields are now at levels not seen since April 2002.
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