(Central News Agency, Washington, 18th, Comprehensive Foreign News Report) Long-term U.S. government bond yields climbed to their highest level since 2007 today, highlighting rising price pressures caused by war in the Middle East and growing concerns about U.S. deficit spending.
Agence France-Presse reported that the U.S. 30-year Treasury bond yield climbed to 5.34% this morning before falling back. Rising yields have forced the U.S. government to refinance debt at rates not seen since before the global financial crisis in 2008.
The U.S. 10-year Treasury yield currently stands at 4.71%, up from 3.94% at the end of February before the U.S. and Israel jointly launched air strikes against Iran.
Inflation concerns push yields higher
Forex.com analyst Fiona Cincotta said: "With oil prices approaching $90 a barrel, investors are increasingly worried that the inflationary shock may last longer."
U.S. inflation cooled slightly in July, with an annual growth rate of 3.4%, but some analysts believe the slowdown may be short-lived.
In anticipation of high inflation, bond investors are demanding higher yields to compensate for the erosion of value during the period they hold the bonds.
Yields also climbed sharply in May and late July, when oil prices surged.
Fed policy direction raises market concerns
"Yields are rising because the market believes the Federal Reserve (Fed) may be too slow to respond to high oil prices and inflation," said Sam Stovall, an analyst at CFRA Research.
The latest wave of rising yields came after the Federal Reserve decided on July 29 to keep interest rates unchanged, choosing not to raise interest rates despite stubbornly high inflation.
Market observers pointed to contradictions between the Fed's decision in July and Fed Chairman Kevin Warsh's tough rhetoric on inflation.
Neil Wilson, an analyst at Saxo Markets, said the rise in yields was a response to the Fed's lack of clear policy direction. After Washer took over as chairman, he canceled all forward guidance to the market.
"That's one of the factors driving the long end of the yield curve higher in particular," Wilson said of long-dated bonds.
U.S. debt rises as government competes with tech industry for funding
Analysts at Commerzbank believe that in addition to monetary policy, there are other factors pushing up government bond yields.
According to the US financial media CNBC, the United States had a budget deficit of US$432.3 billion in July, the largest monthly deficit since March 2021. The deficit for the fiscal year ending on September 30 is likely to reach US$2 trillion.
According to data from the U.S. Treasury Department, the U.S. national debt has exceeded $39.9 trillion, almost twice the level in 2010, and various signs indicate that the debt will continue to increase.
U.S. officials auctioned 10-year and 30-year Treasury bonds last week, raising $67 billion, with yields reaching their highest levels since 2007 and 2001 respectively.
The government also must compete with corporate bond issuance for funding, and the technology industry has poured hundreds of billions of dollars into investment in the United States this year alone.
Rising yields impact private sector and election sentiment
Higher yields mean that mortgage interest rates will rise, as well as business loan, car loan and credit card interest rates.
"The higher the interest rates, the higher the costs," Stovall said. "Typically, businesses and consumers will try to reduce those costs, probably by cutting back on spending."
Such unfavorable borrowing conditions, coupled with rising gasoline prices, have put pressure on U.S. President Trump's political situation and posed a challenge to his Republican Party in the upcoming midterm elections.
Japanese, French and German government bond yields also rose
The U.S. is not the only country facing rising bond yields as rising oil prices ripple through the global economy.
