U.S. bond yields have reached levels unseen in over two decades, with the 30-year Treasury closing at 5.62% on September 30 and the 10-year hovering near 5.3%. Interest on the national debt reached $857 billion in the first nine months of the fiscal year, exceeding spending on Medicare or national defense. While long-term inflation expectations remain moderate at 2.3%, the real yield has climbed above 3%, indicating that creditors demand higher compensation to finance the federal government. With deficits near $1.9 trillion and surging private investment demand for AI infrastructure, real interest rates are rising, and Treasury interventions like bond buybacks have only temporary effects. The only durable solution requires a combination of tax increases and spending cuts, but with limited fiscal room, the bulk of adjustment must come from expenditures.
Source: Read the original article
