US long-term interest rates reach the highest level in 19 years, a headwind for the Trump administration

[Washington, New York Current Affairs] US long-term interest rates continue to remain high. Bond selling has rapidly accelerated in the market due to expectations of further interest rate hikes by the Federal Reserve Board (Fed) and increased investment in artificial intelligence (AI). Curbing interest rates is an important issue for the Trump administration, which is pursuing ``affordability'' ahead of the midterm elections in November. However, with the federal government's debt ballooning to over $40 trillion (approximately 6,300 trillion yen), no effective countermeasures have been found, creating a headwind for the administration.

The yield on the 10-year U.S. Treasury bond, an indicator of long-term interest rates, soared above the 5% mark on the 23rd, hitting its highest level in 19 years. Since then, the record has been updated every day. At the end of the weekend trading on the 25th, the bond selling rate was 5.16%, down 0.04 points from the previous day, although the bond selling had stopped, but the situation is still high.

The Federal Reserve, which decided to raise interest rates for the first time in about three years in the middle of this month, has become a ``hawk'' who is positive about further tightening. Cleveland Federal Reserve Bank President Hammack expressed concern on the 25th that underlying inflation is "high." New York Fed President William Williams expressed support for the prospect of further interest rate hikes by the end of the year, saying it "seems reasonable."

There are deep-seated concerns about prolonged inflation due to high oil prices due to the worsening situation in the Middle East, and the interest rate futures market is pricing in around three additional interest rate hikes. However, market participants have pointed out that ``there is also a risk that inflation will not subside even if interest rates are raised'' (Japanese Securities).

The administration is nervous about the Federal Reserve's hawkish stance and rising interest rates. President Trump has called on the Federal Reserve to "quickly lower interest rates." Treasurer Bessent led a unique initiative to increase buybacks of long-term government bonds in order to suppress interest rates, but the effect did not last long. In the market, some economists say, ``It was a failure.''