Government bond yields reportedly climbed across several major economies Tuesday as investors sold off debt amid mounting concerns over inflation and rapidly expanding public deficits.
The yield on the benchmark 10-year U.S. Treasury rose above 4.7% Tuesday morning, reaching its highest level since October 2023.
The 30-year Treasury yield remained above 5.2%. It had traded below 5% in late June but moved higher during the past two months, reaching its highest point since April 2007 in mid-August.
Higher Treasury yields can directly affect Americans by pushing up mortgage rates for people attempting to buy homes. Borrowing costs for other purchases, including vehicles, can also face pressure from movements in the bond market.
The sell-off extended well beyond the United States.
Japan’s 10-year government bond yield briefly climbed above 3% Tuesday before closing at 2.994%, its highest level in approximately three decades.
In the United Kingdom, the 10-year bond yield traded above 5.2% for the first time since July 2008, during the global financial crisis.
Economist Robin Brooks pointed to growing government debt as a major factor behind the market turmoil. Brooks said U.S. markets are more focused on the future path of the federal deficit than on other economic data.
“The underlying dynamic in the Treasury market is more worrying than you think,” Brooks, a senior fellow at the Brookings Institution, wrote Tuesday on Substack.
The U.S. national debt surpassed $40 trillion last month. That figure is twice the level recorded in 2017 and equals roughly 122% of the nation’s gross domestic product.
Other leading economies also carry substantial debt burdens.
Japan’s national debt stands above 1.5 quadrillion yen, the equivalent of more than $9 trillion. The country’s debt is approximately 251% of its GDP.
Inflation concerns have continued to weigh on markets, particularly as the ongoing war with Iran drives uncertainty. The conflict has entered its seventh month with no indication of a peace agreement between the United States and the Islamic Republic. Both sides exchanged military strikes Sunday.
Brent crude oil, the international benchmark, traded above $92 Tuesday. West Texas Intermediate crude, the North American benchmark, rose above $88 per barrel.
Annual U.S. inflation stood at 3.7% last month, according to the personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge.
Brooks argued last month that the Middle East conflict was having an outsized market effect because governments were already carrying heavy debt loads and running large deficits.
“When you have a lot of debt and run unsustainably large budget deficits, you’re extremely vulnerable to any old shock that comes along,” Brooks wrote.
Federal Reserve Chair Kevin Warsh has also stopped providing forward guidance with interest-rate decisions, creating additional uncertainty for investors. Warsh said Friday that such guidance should be “limited and circumscribed” under normal conditions.
Treasury Secretary Scott Bessent is attempting to stabilize the bond market. Beginning Sept. 9, the Treasury will double the maximum value of longer-dated securities it can repurchase.
The announcement briefly pushed the 30-year yield lower, but the decline proved short-lived.
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