US Bond Yields Keep Rising: Can Washington Control Borrowing Costs Without Fueling Inflation?

US Bond Yields Latest News:  Interest rates of US Treasury bonds are close to their peaks in more than two decades, putting more pressure on Washington as the country continues to rely on heavy borrowing to pay for its huge budget deficits. It becomes a source of increasing worry as it makes borrowing costs for both the government and individuals and companies even higher.

On October 5, the interest rate on the 10-year Treasury bond stood at 5.28%, having earlier breached 5.3%. According to Reuters, the yield on the 10-year Treasury note was at its peak since 2002, while the 30-year yield had also hit multi-decade peaks.

US Treasury Yields Rise: Why Are Borrowing Costs Increasing?

Here are several causes that explain the trend. The US government continues to finance its budget deficits through debt issues amid persistently high levels of government debt. Meanwhile, there are persistently high risks of inflation amid the surge in energy prices.

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The US economy also demonstrated its resilience. High investments into artificial intelligence and related infrastructures boost economic growth and prevent bond yields from falling amid pressures on interest-rate sensitive sectors, including housing sector.

The consequence is a growing cost of servicing debt. Reuters suggests that the US government spends about $1 trillion annually on interest payments on over $40 trillion of debt.