30-Year U.S. Treasury Yield Hits 5.22%, Highest in 25 Years

Yield Surpasses 5% for Four Consecutive Months
U.S. Fiscal Debt Soars Following Outbreak of Iran War

AP Yonhap News

The yield on 30-year U.S. Treasury bonds issued by the U.S. government has soared to its highest level in 25 years. Analysts attribute this surge to the severely worsened U.S. fiscal deficit, which has snowballed since the COVID-19 pandemic and has been exacerbated by the Iran war. The U.S. Treasury even attempted to cooperate with Japan to support the yen, aiming to curb the rise in long-term Treasury yields, but such measures have proven insufficient.

According to Bloomberg News on August 13 (local time), at the U.S. Treasury’s auction of 30-year bonds valued at $25 billion (approximately KRW 35.51 trillion), the winning yield reached an annual high of 5.22 percent. This marks the highest level in 25 years, since the 5.52 percent recorded in August 2001.

At the beginning of last year, when U.S. President Donald Trump began his second term, the 30-year bond yield was just 4.91 percent. Since then, the U.S. national debt has approached $40 trillion (about KRW 5,681.6 trillion), surpassing 123 percent of nominal Gross Domestic Product (GDP), leading to extreme fluctuations in bond yields. During the previous Joe Biden administration, the U.S. government’s debt soared after the COVID-19 pandemic, causing interest expenses to balloon. In addition, the Iran war, which began in February this year, has been prolonged, further aggravating U.S. government debt.

The U.S. Treasury is also wary of the continued rise in long-term Treasury yields, as it pushes up the government’s borrowing costs. According to Bloomberg News, on August 9 the U.S. Treasury revised the language in its recent quarterly refunding announcement (QRA), changing the terminology from a review of “increases” in the issuance size of coupon and floating-rate notes to a review of “changes.” The market interpreted this as a possible sign that the government might reduce the supply of long-term Treasuries. The move is seen as an effort to minimize the possibility of further increases in long-term yields amid the recent clear upward trend.

At the end of last month, before this, the U.S. Treasury coordinated with Japan to intervene in a joint yen-buying operation for the first time in 28 years since 1998. Observers in and outside the U.S. analyze that the intervention aimed to prevent a further surge in Treasury yields if Japan— which holds large amounts of long-term U.S. bonds— were to sell these assets to defend the yen. David Meier, economist at Swiss asset manager Julius Baer, noted, “The United States may have participated in supporting the yen to limit Japanese selling pressure and thereby help keep U.S. Treasury yields stable.”

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