US Bond Market Under Scrutiny as Long-Term Treasury Yields Spike
The US bond market is under close scrutiny as long-term Treasury yields spiked last week, driven by investors reassessing the country’s fiscal outlook in light of President Trump’s proposed tax legislation. According to Yahoo Finance, the 30-year Treasury yield surged as high as 5.15% last week, hovering near its highest level since 2007.
In early Tuesday trading, yields pulled back slightly, with the 30-year yield dipping back below 5% following reports that Japan’s central bank may scale back its own bond issuance. However, investor anxiety remains elevated, with concerns over ballooning deficits, stubborn inflation, and political uncertainty top of mind. As Yahoo Finance reports, the current wave of unease reflects a collision of both new and familiar threats.
At the center of it all is Trump’s newly advanced tax bill, which cleared the House last week and is now headed to the Senate. The legislation proposes sweeping cuts to individual and corporate tax rates but lacks swift and substantial spending cuts, deepening investor concerns over the US’s already fragile fiscal situation. According to Eric Winograd, chief economist at AllianceBernstein, speaking to Yahoo Finance, "We’re concerned about the 10-year and the 30-year in particular as it pertains to the fiscal position, and that makes it much more difficult to forecast."
Historically, Treasury yields have followed the business cycle and expectations for Fed policy. However, with the "big beautiful bill" projected to add $4 trillion to the national debt over the next decade, fiscal risk has become a key driver of long-term rates. As Yahoo Finance notes, this has led to concerns that the US’s already fragile fiscal situation will be exacerbated.
Winograd further stated that, "There’s no evidence of fiscal restraint. If anything, we’re seeing additional fiscal deterioration. As a result, we expect the yield curve to steepen, and that longer-dated yields [will] remain sticky." This sentiment is shared by many investors, who are keeping a close eye on the bond market as the US fiscal outlook continues to deteriorate.
The impact of the tax bill on the US bond market will be closely watched in the coming weeks and months. As Yahoo Finance reports, the proposed legislation has sparked concerns over the US’s already fragile fiscal situation, and investors are eagerly awaiting further developments. For now, the US bond market remains under scrutiny, as investors navigate the complexities of the current economic landscape.
In related news, investors are also keeping a close eye on the US stock market, which has seen significant fluctuations in recent weeks. As Yahoo Finance reports, the Dow, S&P 500, and Nasdaq have all seen significant gains in recent days, driven by hopes of a strong economic recovery. However, with concerns over the US fiscal outlook and the impact of the tax bill on the bond market, investors remain cautious, and the situation is being closely monitored.
