U.S. Treasury yields climbed toward multi-decade highs on Friday, erasing earlier relief as fiscal deficits and hawkish central bank expectations outweighed assurances from Treasury Secretary Scott Bessent that government borrowing levels lacked "anything magic."
The 10-year Treasury yield advanced toward 4.70%, while the 30-year yield hovered near 5.25%, reapproaching its 19-year high of 5.337% set earlier in the week. The surge followed the U.S. national debt surpassing $40 trillion for the first time, a milestone Bessent framed as manageable through economic growth rather than immediate fiscal tightening.
Global bond markets extended losses for a second consecutive week as investors reassessed long-term borrowing costs. In Europe, the Germany 10-year bund yield rose to 3.254%, nearing its highest level since May 2011, while the 2-year schatz yield climbed to 2.841%. France’s 10-year OAT yield settled near 4.10%, reflecting regional inflation persistence and primary market indigestion.
Money markets increased wagers on a September rate hike by the European Central Bank, with traders citing sticky inflation data and supply-side constraints in the bloc’s debt markets. Primary dealer balance sheets in the U.S. remained under strain from heavy federal bond issuance and corporate debt sales, particularly from technology firms financing artificial intelligence infrastructure.
Geopolitical risks in the Middle East added upward pressure on term premiums, as threats of expanded U.S. sanctions against Tehran disrupted commercial tanker traffic through the Strait of Hormuz. Brent crude oil held near $93 a barrel, reflecting elevated energy cost risks that complicate inflation management for central banks.
Investor focus shifted to the Federal Reserve’s annual Jackson Hole symposium, where policymakers are expected to provide further guidance on the trajectory of long-term borrowing costs amid persistent fiscal and inflationary pressures.
