Treasury yield flirts with longest 5% run since 2007
The 30-year Treasury yield has sat above 5% for 11 sessions, raising borrowing-cost worries as inflation, oil and debt issuance bite.
By Frankie Delgado · News Reporter
3 min read
The 30-year U.S. Treasury yield is one trading day away from a streak Wall Street has not seen since 2007.
MarketWatch reported that the long bond’s yield finished Tuesday with an 11-session run above 5%, its longest such stretch since May, citing Dow Jones Market Data. If it remains above that mark through Wednesday, the run would become the longest in 19 years.
The move comes during a July selloff in the roughly $30 trillion Treasury market, where investors have been demanding more return to hold longer-dated U.S. government debt.
Inflation is still the heavyweight
June inflation data cooled, helped by lower oil prices and a U.S.-Iran ceasefire agreement, according to the MarketWatch report. The consumer-price index rate was still 3.5%, leaving it well above the Federal Reserve’s 2% target.
The calm in the Middle East has also faded, and global Brent crude prices have climbed back above $90 a barrel, the report said.
Dustin Reid, chief fixed-income strategist at Mackenzie Investments, told MarketWatch that inflation is the biggest problem for longer-duration bonds. If inflation stays higher for longer, investors want more compensation, he said.
The 30-year yield ended Tuesday at 5.13%, according to the report. A higher long-term Treasury yield can ripple through markets because it raises the cost of borrowing for the government and competes with stocks and corporate bonds for investor money.
AI debt is adding competition
Treasurys are also facing more competition from corporate debt tied to the artificial-intelligence spending boom.
MarketWatch cited BondCliQ data showing the combined outstanding debt from Microsoft, Amazon, Alphabet, Nvidia, Meta and Oracle nearing $500 billion. That gives bond buyers more places to shop for yield beyond 30-year government debt.
Alexander Payne, Vanguard’s head of mortgages, agencies and volatility, told MarketWatch there was no single cause behind the latest selloff. He also said buyers have not rushed in to grab the debt quickly.
Payne pointed to the large U.S. deficit and expected AI-related spending as reasons investors may believe they will get other chances to buy longer-duration debt at higher yields.
Washington’s bill keeps growing
The pressure arrives as U.S. borrowing needs keep rising. MarketWatch reported that Defense Secretary Pete Hegseth told lawmakers Tuesday the Iran war had already cost $37.5 billion, and that the Trump administration is seeking a $67 billion supplemental request to help fund the escalating conflict.
The report also noted that U.S. debt topped 100% of gross domestic product this spring and has climbed to nearly $40 trillion, citing Treasury fiscal data.
Foreign buyers have held a shrinking share of U.S. debt in recent decades, according to the Bipartisan Policy Center, which MarketWatch cited. That leaves a bigger role for domestic investors.
Brij Khurana, a fixed-income portfolio manager at Wellington Management, told MarketWatch that a handoff from foreign buyers to domestic holders needs to take place. He said those domestic buyers may prefer to step in when stocks are falling.
Reid said the Treasury Department could grow uneasy if the 30-year yield reaches 5.25%, because a faster rise at the long end of the yield curve could create risks for equities and valuations.
Stocks were still higher for the year as of Tuesday. FactSet data cited by MarketWatch showed the S&P 500 up 9.7%, the Dow Jones Industrial Average up 8.7% and the Nasdaq Composite up 11.2%.
This story draws on original reporting from MarketWatch.