30-Year U.S. Treasury Yield Sustains Highs Above 5%, Longest Run Since Financial Crisis

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The yield on 30-year U.S. Treasury bonds continues to soar.

According to Bloomberg data, the 30-year U.S. Treasury yield has surpassed 5% for 27 trading days so far this year.

This accounts for 19% of all trading days, and notably, it has exceeded 5% for 12 consecutive trading days recently.

This marks the longest period that the 30-year Treasury yield has stayed above 5% since the 2007 financial crisis.

While yields remained above 5% for 50 consecutive trading days back in 2007, the benchmark interest rate is currently 1.5 percentage points lower than it was then, making the market feel the impact of these yields much more severely.

Analysts suggest that long-term yields remain this high due to deteriorating government finances and an increase in corporate bond issuance by private companies to build artificial intelligence (AI) infrastructure.

Tony Rodriguez, head of fixed income strategy at Nuveen Asset Management, pointed out that "the biggest factor pushing up long-term yields is massive national debt and fiscal deficits."

Since 2007, the size of the U.S. Treasury market has surged from 4.5 trillion dollars to 31 trillion dollars.

Over the same period, the ratio of publicly held national debt to U.S. Gross Domestic Product (GDP) has also doubled, exceeding 100%.

Annual interest costs alone exceed 1 trillion dollars.

International credit rating agency Fitch recently warned that "the U.S. debt burden is much higher than that of other AA-rated countries."

Massive corporate bond issuance by private companies to secure funding for AI infrastructure investments is also pushing up bond yields.

Alex Pang, senior portfolio manager at Vanguard Capital Management, noted that pension funds and insurers—which are major buyers of 30-year bonds—now have a wider range of options than before, while adding that it is uncertain whether yields have reached their peak.

Rodriguez of Nuveen also said, "Governments, hyperscalers (large-scale data center operators), and general corporations are all competing to secure investors in the long-term bond market."

Kevin Flanagan, head of fixed income strategy at WisdomTree, pointed out that "fiscal deficits, existing debt, and the potential for increased future Treasury issuances are all factors that must be weighed when evaluating long-term Treasury yields."

In contrast to the sharp rise in long-term bond yields, yields on 2- to 10-year medium- and short-term Treasuries remain near early 2025 levels.

This is because, despite growing expectations of a rate hike by the U.S. Federal Reserve (Fed), investors have flocked to short-term issues, which they still assess as relatively safe.

Hank Smith, head of investment strategy at Haverford Trust, said investors have been worrying about the national debt for the past 20 years, adding, "Tax-exempt clients are not investing in long-term bonds with maturities of 10 years or more because the risk-adjusted reward does not make sense."

(Photo: Yonhap News)

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