US 30-year Treasury yields hit highest level since 2007 on bond selloff

The yield on thirty-year US Treasuries climbed to its highest point in nearly twenty years, driven by investor anxiety surrounding the expanding national debt, heavy supplies of long-dated bond sales, and persistent inflation remaining above the Federal Reserve's target.

The rate on the long bond rose three basis points to 5.29% on Monday, the highest since 2007. This upward pressure on government borrowing costs forms part of a broader surge in advanced economies' bond yields, as investors demand increased compensation for risks linked to escalating government debt and persistently high inflation.

The movement also coincides with a wider market downturn. Wall Street's three major indexes fell on Monday as investors waited for quarterly reports from large retailers to provide insights into U.S. Consumer spending, while oil prices rose as the U.S. And Iran appeared no closer to a deal.

Compounding the pressure on long-dated bonds is a sudden ramp-up of corporate borrowing to fund the artificial-intelligence boom and waning demand from traditional buyers of long-dated bonds. Anshul Pradhan, head of US rates strategy at Barclays Plc, noted that a constructive view on the market would require a combination of a downside fiscal surprise, slower AI-related issuance, a shift in the Treasury's issuance strategy, and sustained soft activity data.

"We have been arguing against fading the long end sell-off, and we continue to do so,"

Anshul Pradhan, head of US rates strategy at Barclays Plc

Pradhan added that a constructive view would require some combination of a downside fiscal surprise, slower AI-related issuance, a shift in Treasury's issuance strategy, and a sustained run of soft activity data.

This trading extends the selloff from last week, which forced the US Treasury to sell $25 billion of new 30-year bonds at a yield of 5.216% — the highest level for such an auction since 2001. A day earlier, the Treasury Department's 10-year auction drew the highest financing cost since 2007.

These surging long-term yields arrive even as recent economic data takes off some of the pressure on Federal Reserve officials to raise short-term interest rates in coming months. A gauge of underlying inflation released last week showed it was more subdued, July's employment report revealed that US employers unexpectedly cut jobs in July, and US retail sales fell by the most in more than a year. Nevertheless, inflation remains well above the Fed's 2% annual target, with the consumer price index last month rising 3.4% from a year earlier.

This softening of US economic data has fueled a divergence between different maturities of Treasuries, steepening the yield curve. The yield on 30-year bonds has risen over 13 basis points so far this month while two-year rates are down 12 basis points.

Market Snapshot

• 30-year US Treasury yield: Rose to 5.29% on Monday, the highest since 2007.
• Federal Reserve expectations: Traders now see a 31% chance of a 25-basis-point increase, down from roughly even odds a week earlier, according to the CME FedWatch Tool.
• Precious metals: Spot gold rose 0.9% to $4,417.24 an ounce by 1:34 p.m. EDT (1734 GMT).

Geopolitical tensions remained elevated after Iran urged the US to accept defeat and President Donald Trump warned Americans to prepare for persistently high fuel prices.

Meanwhile, the technology sector experienced varying movements. Shares rose 0.6% after a report said the chipmaker had scaled back plans to support a proposed OpenAI data centre project in Ohio, easing concerns about circular financing in the AI sector. Technology stocks rose in premarket trading after Reuters reported that IPO-bound Anthropic expects revenue to reach roughly $190 billion to $200 billion in 2028. Amazon gained 1.2%, Alphabet added 0.6%, Micron Technology climbed 3% and Broadcom rose 1.1%.

Looking ahead, markets will closely watch Nvidia’s results next week for signs that the technology-led rally can continue. Investors will also turn to earnings from Walmart and Home Depot later this week.