UST liquidity & global bond selloff
Key Questions
What are current levels for US Treasury yields?
The 30-year UST yield has reached approximately 5.19%, near 2007 highs, while the 10-year yield is near 4.67%.
Why are US Treasury yields remaining elevated?
Fiscal dominance, heavy AI-related capex, and structural concerns are keeping rates high despite some views that energy inflation is transitory.
What risks are associated with rising US interest costs?
Soaring debt-servicing costs have triggered warnings of a potential debt spiral, even as an Iran peace deal could ease energy prices.
30Y UST ~5.19% (2007 highs), 10Y near 4.67%; foreign holdings -138B March; fiscal dominance and AI capex keep rates elevated. Bond market shows structural divide: market prices hikes but asset managers see energy inflation as transient, raising term premium. Musalem says Treasury selloff signals need to bolster Fed's inflation credibility. Warsh's suggestion that higher yields could substitute for hikes backfired, leading to credibility-driven selloff. Soaring interest costs spark debt spiral warnings. Iran peace deal may ease energy costs but fiscal concerns remain.