The U.S. 30-year Government Bonds yield has surged to a record high since 2007, the highest in 19 years. As concerns grow over prolonged inflation in the United States and corporations' funding needs fueled by the artificial intelligence (AI) industry boom, selling of long-dated U.S. Government Bonds is spreading across the bond market.
On the 17th (local time), the U.S. 30-year Government Bonds yield rose about 0.045 percentage points from the previous trading day to 5.311% per year. That is the highest level since June 2007, just before the global financial crisis. The 10-year Government Bonds yield, which serves as a benchmark for the global bond market, also climbed into the 4.72% range, and the 2-year note, sensitive to currency policy, rose above 4.18%. As the U.S. government floods the market with Government Bonds to plug long-term fiscal deficits, the value of U.S. Government Bonds is falling in the market and yields are soaring.
At a $25 billion auction of 30-year notes conducted by the U.S. Treasury last week, the stopping yield hit 5.216%, the highest since 2001. As the Treasury issued a slew of Government Bonds to shoulder a massive deficit, concerns over inflation and the burden of U.S. government finances were raised, and demand for U.S. Government Bonds plunged. Major corporations making large-scale investments in the artificial intelligence industry are also increasing corporate bond issuance to secure funds, dispersing even traditional demand for long-dated Government Bonds, major outlets reported.
Typically, when economic indicators are weak, Government Bonds yields fall on expectations that the Central Bank will cut its policy rate. But even as U.S. July employment and retail sales data recently released were both weak, the rise in 30-year yields has not abated. This is interpreted to mean bond investors are weighing the structural risks of high inflation hovering in the 3% range and a vast national liability of $2 trillion every year more heavily than short-term economic trends. On top of that, expectations for currency policy easing through rate cuts are receding, and the gap between long- and short-term yields is widening further.
Wall Street experts said U.S. long-term Government Bonds yields are likely to rise for the time being until concerns over fiscal soundness subside. Rising long-term bond yields can push up mortgage and corporations lending rate in succession, placing a heavy burden on the real economy overall. Financial services company Ameriprise noted, "Investors assessing long-term Government Bonds yields are prioritizing long-term fiscal sustainability among factors such as inflation, currency policy, and economic growth prospects."