U.S. long-dated borrowing costs climbed to their highest level in over twenty years, extending a global bond selloff as investors demanded greater compensation to hold government debt. According to The Globe and Mail, the yield on the 30-year Treasury rose to just over 5.45 per cent, marking its highest point since 2004. Meanwhile, the benchmark U.S. 10-year yield hovered near 5.158 per cent, and the 2-year Treasury yield stood largely at 4.864 per cent as reported by Yahoo Finance Germany.
US 30-Year Treasury Yield Reaches Highest Level Since 2004
The downward pressure on bond prices has been driven by strong economic growth, high levels of public debt, rising energy costs, and an ongoing conflict involving Iran that pushed oil prices higher and raised renewed inflation fears. Yahoo Finance noted that oil prices climbed toward $100 per barrel after U.S. President Donald Trump signaled support for a diesel export ban, while Iranian President Masoud Pezeshkian vowed that Tehran would never capitulate in response to U.S. threats.
Federal Reserve Rate Hike Expectations and Market Reaction
The accelerating selloff on Wednesday and Thursday followed hotter-than-expected business activity data that stoked Federal Reserve rate-hike bets. According to CNBC, traders using CME FedWatch Tool data priced in a significant probability of further tightening, with expectations for an upcoming quarter-point rate increase rising substantially following the release of purchasing managers’ index data.
Hawkish remarks from Federal Reserve officials, including Governor Michael Barr and Chicago Fed President Austan Goolsbee—who warned that policymakers might need to view the energy shock as a source of persistent inflation—contributed to the shifting monetary policy outlook. New York Fed President John Williams stated that the U.S. economy displayed remarkable resilience and described another rate hike by the end of the year as reasonable.
Broader Economic Impacts and Global Debt Pressures
The surging yields have begun to impact broader financial markets, pushing U.S. 30-year mortgage rates to around 7 per cent, roughly a percentage point higher than before the war. Analysts warned that higher borrowing costs increase the federal government’s debt interest burden. Bank of America analysts pointed out that while long-end yields have returned to pre-financial crisis levels, government net interest expenses reached a record high of 3.3 per cent of GDP in the second quarter of 2026, compared to 1.7 per cent when the 10-year yield was near 5 per cent in 2007.
The debt and borrowing pressures extend internationally. Germany’s finance agency announced that it expects federal borrowing to reach a record €525.5 billion in 2026, driven by refinancing needs and special funds, while Germany’s 10-year Bund yield briefly rose above 3.5 per cent to reach a 17-year high. In Asia, Japan’s 10-year bond yield reached its highest level since 1996. Despite extraordinary measures by U.S. Treasury Secretary Scott Bessent to contain rising borrowing costs through debt buybacks and foreign exchange interventions, yields have continued their upward trajectory.
