US Treasury Yields Hit Two-Decade High Amid Record Deficits

On Wednesday the bond market posted a sharp sell‑off in long‑term U.S. Treasury securities, driving the 30‑year note to 5.22% and the benchmark 10‑year to 4.67% – the highest levels in almost twenty years. The move came as investors priced in the full impact of a federal government that is borrowing at a scale unseen in peacetime, with total debt now around $40 trillion and annual deficits hovering near $2 trillion.

Analysts linked the rally to concerns that the Federal Reserve’s decision to keep short‑term rates steady could undermine its credibility on inflation. As Subadra Rajappa of Société Générale put it, “The market is concerned that the Fed not hiking is going to result in persistently higher inflation.” Fed Chair Kevin Warsh reiterated a commitment to bringing inflation down but offered no details on future policy tightening.

Additional pressure stems from elevated oil prices tied to the ongoing Iran conflict and robust spending on artificial‑intelligence infrastructure, both sustaining domestic demand and keeping price pressures elevated. The 30‑year breakeven inflation rate also rose, signaling market expectations of higher long‑term inflation.