The yield on 30-year U.S. bonds exceeded 5.33%
The yield on 30-year U.S. Treasury bonds rose by about 2 basis points on Tuesday to 5.33%, approaching its highest level since 2002. The yield on 10-year U.S. Treasury bonds, which serves as a benchmark for mortgage, auto loan, and credit card rates, rose by 1.6 basis points to 4.74%.
According to CNBC, the yield on 2-year Treasury notes, which typically reacts to expectations regarding the Federal Reserve’s short-term policy decisions, rose to 4.186%. One basis point equals 0.01 percentage point. Bond prices and their yields move in opposite directions.
The market movement came amid data showing an increase in the U.S. budget deficit. In July, it reached $432.3 billion—the highest monthly figure since March 2021. Since the beginning of the year, the deficit has approached $1.8 trillion. Government spending on interest payments on the national debt, which stands at nearly $40 trillion, totaled about $1.2 trillion this year.
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Despite relatively modest overall price growth in June and July, annual inflation in the U.S., according to CNBC, still significantly exceeds the Federal Reserve’s 2% target. The government debt market was also affected by tensions in the Middle East: oil prices rose after the 60-day deadline for a peace agreement between the U.S. and Iran expired.
Deutsche Bank analyst Jim Reed noted that bonds and stocks weakened due to negative geopolitical news from the region. According to him, the lack of signs of an agreement between Washington and Tehran forced investors to factor in the risk of a prolonged closure of the Strait of Hormuz.
Rising government borrowing costs were also observed in other major markets. Yields on long-term Japanese bonds remained near the levels at which they reached a 40-year high in May. Yields on 30-year German bonds were the highest since 2011, while yields on French bonds rose to their highest level since 2008.
