Treasury on Wednesday will be asking investors to hand over another $16 billion for 20 years to help finance the nearly $1.8 trillion U.S. budget deficit so far this year. The answer from investors probably will be "fine, but you need to pay us close to a 5.28% yield" — the going rate for existing 20-year Treasury debt on Tuesday, and the most it's cost Washington to borrow this way since the 20-year tenor was auctioned six years ago. With long-term Treasury yields hovering at multidecade highs, traders have begun asking the uncomfortable question: How much will the U.S. need to pay to convince the world to keep lending it money?
I'm 63, a retired CPA with a $1.2 million 401(k). Do I need to bother with a Roth conversion? The bond selloff is rattling investors, but here's why they shouldn't expect a deeper stock downturn Normally, Treasury auctions are routine financial events that play out in the background without much of a fuss.
But persistent government deficit spending, fresh policy uncertainty under the new Federal Reserve Chairman Kevin Warsh and a surge in overall debt issuance has turned individual auctions into high-stakes market events. Last week's auction of 30-year government bonds came at 5.216%, the highest yield for similar debt in a quarter-century. When a Treasury auction results in higher yields than expected, it suggests weaker market appetite.
Because bond prices and yields move in opposite directions, a higher yield occurs when buyers force prices lower before agreeing to lend to the government. See: Bond yields are at multiyear highs, yet stocks have hit fresh records. Here's how long the defiance can last.
It tends to get even more expensive to borrow for longer periods, which can also push up 30-year mortgage rates. That's why alarm has been building as the 30-year Treasury yield on Tuesday BX:TMUBMUSD30Y briefly traded as high as 5.327%, the most since June 12, 2007, while the benchmark 10-year rate BX:TMUBMUSD10Y hit 4.747%, the highest intraday yield since Jan. 15, 2025, according to Dow Jones Market Data. Those yields eased modestly later in the session.
Higher bond yields recently became a new worry for the bull market in stocks, with the S&P 500 SPX, Nasdaq Composite COMP and Dow Jones Industrial Average DJIA on Tuesday headed for a third straight day of declines. See: 6% Treasury yields are the biggest risk facing stocks right now. "It has to do with either the long-term view of monetary policy or this increase in capital demand for capital-expenditure investments in technology and AI," said John Velis, FX and macro strategist for the Americas at BNY.
Extract — continue reading at the source.
