Growing US national debt drives Treasury yields to historic highs

Key Points:

• The U.S. national debt is nearing $40 trillion, prompting investors to demand higher yields on Treasury securities, with recent 10-year and 30-year bond auctions reaching yields not seen in nearly two decades.
• Despite elevated yields and concerns about rising debt and budget deficits, demand for U.S. Treasurys remains steady, supported by their relative attractiveness compared to other developed countries' debt.
• Higher Treasury yields are influencing consumer borrowing costs, including mortgage rates, which may dampen housing market activity and increase costs for other fixed-rate loans over time.
• Rising yields increase the federal government's debt servicing costs, with the Congressional Budget Office projecting net interest expenses to exceed $1 trillion by fiscal year 2026 and potentially doubling by 2036, significantly impacting federal spending.
• Treasurys are still viewed as relatively risk-free investments due to the government's taxing and monetary control powers, although inflation and interest rate shifts pose some risks to investors.