U.S. 30-Year Treasury Yield Hits 5.31%, Highest in 19 Years

Fiscal Deficit and AI Investment Push Long-Term Yields Higher

The yield on the 30-year U.S. Treasury bond has surpassed 5.3%, soaring to its highest level in about 19 years. This sharp rise in long-term yields has been driven by the combination of large-scale fiscal deficits, an increase in corporate bond issuance due to expanding investments in artificial intelligence (AI), and weakening demand for long-term Treasuries.

30-Year U.S. Treasury Yield. Investing.com

According to Bloomberg News on August 17 (local time), the 30-year U.S. Treasury yield rose by 5 basis points (1bp = 0.01 percentage point) to 5.31% compared to the previous trading day. This surpasses the recent monthly peak and marks the highest level since 2007.

The U.S. government's ballooning national debt has eroded the appeal of long-term Treasuries, which have traditionally been considered "the world's safest asset." The Congressional Budget Office (CBO) estimates the federal government's annual fiscal deficit is approaching $2 trillion.

To cover these deficits, the U.S. government needs to issue more Treasuries. In fact, at a $25 billion auction for new 30-year Treasuries held by the U.S. Treasury on August 13, the winning yield reached 5.216%, the highest since 2001.

The AI investment boom is also weighing heavily on the bond market. As big tech and data center companies issue corporate bonds to secure funding for building AI infrastructure, investment demand is becoming increasingly dispersed.

Anshul Pradhan, Head of U.S. Rates Strategy at Barclays, stated, "For investors to take an optimistic view of long-term yields, we need to see a combination of better-than-expected fiscal conditions, a slowdown in AI-related bond issuance, a shift in Treasury issuance strategy, and a continued economic downturn."

Uncertainty surrounding the Federal Reserve's monetary policy is another factor pushing up long-term yields. Noshad Sha, Head of EMEA Fixed Income Sales at Citadel Securities, noted that the recent rise in long-term rates reflects market concerns that inflation has been running above target for an extended period, while the Fed has shown reluctance to engage in further tightening.

The rise in long-term yields is also becoming a burden for the Trump Administration. As the economic impact of an oil price shock caused by the U.S.–Iran war weighs on the economy, the continued rise in Treasury yields is driving up borrowing costs for households and businesses, including mortgage rates, according to Bloomberg.

This content was produced with the assistance of AI translation services.