The U.S. Treasury auctions $16 billion of 20-year debt Wednesday as a global bond selloff pushes long-term yields to multidecade highs. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite headed for a third straight day of declines on Tuesday even as deficit concerns and rising borrowing costs rattle investors from Washington to Tokyo.
Treasury tests demand with $16 billion sale
The U.S. Treasury on Wednesday will ask investors to hand over another $16 billion for 20-year debt. The sale helps finance a nearly $1.8 trillion U.S. budget deficit so far this year. Investors will likely demand close to a 5.28% yield — the going rate on existing 20-year Treasurys Tuesday, and the most it has cost Washington to borrow this way since the tenor was auctioned six years ago.
Last week's 30-year bond auction came at 5.216%, the highest yield for similar debt in a quarter-century. The 30-year Treasury yield on Tuesday briefly traded as high as 5.327%, the most since June 12, 2007. The benchmark 10-year rate hit 4.747%, the highest intraday yield since Jan. 15, 2025.
Buyback plan calms the market
Those yields eased Wednesday after the Treasury Department announced it will at least double debt buybacks in the next few months, targeting bonds maturing in roughly 10 to 30 years. Still, higher yields recently became a fresh worry for the bull market in stocks. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average each headed for a third straight day of declines on Tuesday.
Persistent deficit spending, fresh policy uncertainty under new Federal Reserve Chairman Kevin Warsh, and a surge in debt issuance have turned individual auctions into high-stakes market events. According to Wells Fargo Investment Institute co-head of global fixed income Luis Alvarado: "Deficits are happening globally, so it's not a U.S.-only story."
Debt load nears $40 trillion
The U.S. national debt is expected to soon breach $40 trillion for the first time. The Congressional Budget Office last week raised its 2026 deficit estimate to $2.1 trillion, $200 billion more than it projected in February.
Beyond the U.S., deficits and higher energy prices from the Iran conflict have been factors pushing up yields in most developed economies. Germany's 30-year bund yield reached a 15-year high of 3.763%. Japan's 30-year yield rose to 4.1285%, topping the high seen in spring.
Source: MarketWatch
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