Longer-term borrowing costs in the United States reached their highest levels in nearly 25 years as Treasury yields continued to climb amid mounting economic pressures. On Tuesday morning in New York, the yield on the 30-year US Treasury bond rose 0.05 percentage points to 5.61 percent, marking its highest reading since June 2002. Meanwhile, the 10-year Treasury yield increased by 0.04 percentage points to 5.28 percent, pushing benchmark borrowing costs to a level unseen since 2007. Bond yields move inversely to prices, so rising yields indicate declining bond prices.

The recent surge in Treasury yields is part of a broader sell-off in the bond market that has accelerated in recent weeks. Analysts attribute this trend to rising oil prices, which have stoked inflationary concerns, alongside strong US economic data that have strengthened expectations for additional interest rate increases by the Federal Reserve. Despite efforts by Treasury Secretary Scott Bessen to temper the sell-off, including the announcement of an expanded long-term bond buyback program in mid-August, yields have continued to rise—up from 5.2 percent then to the current level.

Arun Sal, a multi-asset strategist at Pictet Asset Management, noted that investors seem reluctant to hold longer-duration debt, causing the term premium—the extra yield investors demand for holding long-term bonds—to widen further. Kristina Hooper, chief market strategist at Man Group, pointed to increased concerns about fiscal sustainability and inflation driven by the energy crisis, which she linked to the ongoing US-Iran tensions.

The US national debt recently surpassed $40 trillion as government borrowing continues at a historically rapid pace, heightening investor apprehension about the country’s fiscal outlook. Hooper warned that these factors could dampen the appeal of US Treasuries, particularly for foreign buyers, amid perceptions of fiscal strain and unpredictability in Washington’s foreign policy.

Global oil prices remain elevated, with Brent crude trading above $100 a barrel for much of this month before easing slightly to around $104. High energy costs have contributed to the inflationary environment, prompting investors to anticipate a more aggressive tightening cycle by major central banks worldwide. The Federal Reserve raised interest rates earlier this month for the first time since 2023, and futures markets are pricing in additional quarter-point hikes over the next year.

Despite the bond market turbulence, riskier assets have shown relative resilience. The S&P 500 declined 0.3 percent on Tuesday but remained only about 2 percent below its all-time high reached in August. The Nasdaq 100 edged up 0.2 percent, reflecting continued investor appetite for equities and corporate credit amid the tightening financial conditions.