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Treasury yields are blowing up CBO forecasts, and experts who downplayed US debt fears are worried
Fortune • • general
Key Points:
- The Congressional Budget Office projected 10-year U.S. Treasury yields to rise gradually, reaching around 4.4% by 2036, but recent geopolitical events like the Iran war have pushed yields higher than expected.
- Higher yields increase the Treasury Department's interest payments on the $40 trillion national debt, with annual interest potentially reaching $2.7 trillion by the decade's end, surpassing Medicare or Social Security costs.
- Contributing factors to rising yields include a hot economy, tight labor market, large debt and deficits, competition for bond investors, and heightened geopolitical risks reflecting a less stable global environment.
- Experts warn of a potential debt spiral where rising interest costs fuel more debt, increasing the risk of a fiscal crisis that was previously considered unlikely but now appears more imminent.
- Market observers and former economic advisers who were once less concerned about the debt now express alarm as bond yields approach levels that could trigger a broader debt crisis.
