The US Treasury paid its highest borrowing cost on long-dated debt in twenty-five years after Thursday's 30-year bond auction priced at a yield of 5.216%. The result signals investors want a bigger premium to hold long-term US debt amid persistent inflation concerns, while the Bank of Japan reportedly prepares to raise rates in September for separate reasons of its own.
The US Treasury paid the highest long-term borrowing cost in a quarter century on Thursday, after a 30-year bond auction priced at a yield of 5.216%, the most since 2001. Bond yields rise when prices fall, and the $25bn sale of 30-year debt showed investors demanding a heavier premium to hold long-dated US paper.
Inflation fears keep pressure on long-term debt
The result suggests investors expect inflation to stay elevated for some time, which would keep policymakers holding interest rates higher for longer. That matters for the Treasury Department, which needs to fund a growing deficit driven by Donald Trump's spending plans, tax cuts and tariff refunds.
Gennadiy Goldberg, head of US rates strategy at TD Securities, said the rising yield creates a problem for Washington: "They have to fund the government at more expensive levels."
Bank of Japan tightening adds to the pressure
Rising US yields have also weighed on Japan's currency. Concern over rising US borrowing costs was one reason Washington worked with Tokyo earlier this month to shore up the yen, though the intervention only produced a temporary rebound before the currency began weakening again.
According to Reuters, three sources say the Bank of Japan is set to raise interest rates as soon as September, citing inflation worries and yen weakness, with further hikes possible afterward.
Source: The Guardian
Trading involves risk.
Risk Disclaimer
