30-year US Treasury yield hits highest level in 19 years

By John Towfighi, CNN

New York (CNN) — A bond rout is deepening as inflation fears take hold of the Treasury market, threatening to raise borrowing costs across the US economy.

The 30-year US Treasury yield just hit 5.2%, its highest level since 2007, rising on worries about persistent price hikes because of the Iran war. Unsustainable government finances and interest rate hike fears have also sent investors pouring out of Treasury bonds. Yields rise when bond prices fall.

The war with Iran has ignited a global energy shock, with oil and gas prices at their highest levels in four years while the critical Strait of Hormuz remains effectively closed. That has started to seep out into other parts of the economy, including food prices and airfares.

“Bond markets are warning that inflation could prove much stickier than many investors anticipated,” Nigel Green, CEO at deVere Group, said in a note.

The benchmark 10-year yield, which influences mortgage rates, surged to 4.67%, its highest level in over a year. Bonds are sensitive to inflation, and investors are demanding higher yields to compensate for the risk of higher consumer prices eating into the value of their returns.

The Treasury market sets borrowing costs across the economy. Higher yields can ripple through to higher mortgage rates, auto loans and rates on business loans. Higher yields can also pose a headwind for the stock market.

The United States isn’t alone – investors have been selling off bonds around the world on inflation concerns. Meanwhile, angst about government spending and persistent deficits continues to linger, prompting investors to demand higher yields to hold long-term government debt. The 30-year UK gilt yield hit its highest level since 1998. Japan’s 30-year bond yield hit its highest level on record.

The rise in yields also reflects investors’ expectations that central banks will need to do more to halt the recent surge in inflation. US consumer prices in April rose at the highest annual rate in three years, according to data from the Bureau of Labor Statistics.

“The forces driving the sell-off – fiscal deterioration, defense spending, sticky inflation, central bank paralysis – are not resolving in the next week. They are getting worse,” Ajay Rajadhyaksha, global chairman of research at Barclays, said in a note.

It’s been 80 days since the war with Iran began. The stock market tumbled before reclaiming record highs. The bond market never recovered. The 10-year yield traded at just below 4% before the war with Iran started and is now trading near 4.7% as a sell-off has picked up steam in recent trading sessions.

The surge in borrowing costs is exacerbating concerns about global market volatility. Higher yields can pose trouble for stocks as higher interest rates shift calculations for stocks’ value and higher bond yields can also pull investors away from stocks.

US stocks were slightly lower Tuesday: The Dow fell 150 points, or 0.3%, and the S&P 500 fell 0.2%. The Nasdaq was down 0.3% after briefly falling more than 1%.

Two-year Treasury yields have also surged to their highest level in over a year. Two-year yields track expectations for the Federal Reserve’s benchmark interest rate, and the jump in yields signals investors expect the central bank to be on hold, or even hike rates, in the coming months.

The rise in yields is at odds with President Donald Trump’s preference for lower interest rates. It also comes as Trump’s pick for Fed chair, Kevin Warsh, is set to take the helm at the central bank.

“Even if immediate rate hikes are not the base case, investors are demanding significantly higher compensation for inflation risk, fiscal deterioration and geopolitical uncertainty,” Green at deVere Group said.

For the 10-year yield, 4.8% is a key threshold to watch, The 10-year yield has only closed above 4.8% a handful of times since 2007.

“Inflation is probably the single-biggest driver,” said Thomas Tzitzouris, head of fixed income research at Strategas Research Partners. “The second-biggest driver, and this is not unique to the US, in fact, the US is probably still the cleanest dirty shirt, is that deficits are just skyrocketing globally, and they have been for a very long time.”

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.