A US$40 trillion debt pile and record AI borrowing are crowding the long end of the curve
Thirty-year US Treasury yields touched 5.333 percent in European trading on Tuesday, a level last seen in 2007.
The Wall Street Journal, citing Tradeweb data, reported the US 10-year yield climbed to 4.748 percent, its highest since January 2025, while the 10-year German Bund yield reached 3.263 percent, unseen since 2011.
Canadian 30-year debt traded at its highest yield in at least a decade alongside bonds in Japan and Germany, according to the New York Times.
The US 30-year bond eased more than two basis points to 5.285 percent later in the session, CNBC reported, after setting a fresh 19-year high earlier in the day.
The US 10-year note, the benchmark for American mortgages, auto loans, and credit card debt, slipped more than one basis point to 4.706 percent, per the network, while the two-year note edged down to 4.175 percent.
A US federal budget shortfall of US$432.3bn in July, the widest single month since March 2021, pushed the year-to-date American deficit to nearly US$1.8tn, CNBC reported, citing US Treasury Department data.
Total US government debt sits just below US$40tn, with the publicly held portion nearing 100 percent of American gross domestic product (GDP), according to the outlet.
US debt financing has cost about US$1.12tn through July and is expected to reach US$1.37tn for the full American fiscal year, roughly US$84bn more than in 2025, CNBC reported.
"These are not new forces, and the rise in long-term yields has been gradual rather than sudden," Anshul Pradhan, head of US rates research at Barclays Capital, wrote in a Monday client note reported by CNBC.
Three separate soft US data releases this month argued for lower yields, Pradhan told clients, and the long end moved higher regardless.
US companies have sold nearly US$1.7tn in bonds so far this year, up 27 percent from the same period a year ago and more than all of 2025 combined, according to CNBC citing Securities Industry and Financial Markets Association (SIFMA) data.
Reuters reported that much of that American corporate borrowing funds data centres and artificial intelligence (AI) infrastructure, increasing competition for investor capital.
In a note carried by CNBC, Ian Lyngen, head of US rates strategy at BMO Capital Markets, said a "record pace of corporate bond issuance" has added heavy duration supply to US fixed income markets, alongside worries about growing government debt.
Lyngen sees the path of least resistance favouring higher long-end US rates in the near term, absent a supply slowdown, a sharp tightening of financial conditions, or a weaker outlook.
Brent crude rose 0.4 percent to US$91.29 a barrel, having traded below US$80 in early August, the Wall Street Journal reported, after the 60-day memorandum of understanding between the US and Iran expired without improvement in Strait of Hormuz shipping conditions.
As per the Journal, Derek Halpenny, head of research for global markets EMEA at MUFG, said the deteriorating situation is intensifying inflation concerns and worries over the US fiscal position.
The US Federal Reserve has held its benchmark rate between 3.50 and 3.75 percent all year under new chairman Kevin Warsh, CNBC reported, with markets pricing little chance of an American rate increase before December, according to CME Group's FedWatch tool.
Deutsche Bank macro strategist Henry Allen wrote in a note reported by CNBC that strong growth and buoyant risk assets keep financial conditions accommodative, which could push central banks into faster hikes.
Higher US yields shrink how much American buyers can borrow for a given monthly payment and discourage homeowners holding low-rate mortgages from moving, Reuters reported.
Banks, insurers, and pension funds face a separate channel, per the outlet, because a fast rise erodes the market value of existing long-dated holdings, and institutions forced to sell before maturity lock in losses.
"The bond market is actually finally working the way it should work. It's allocating capital efficiently," Ed Yardeni, head of Yardeni Associates, said in a CNBC interview about the US market.
Yardeni said the American bond market is testing the outer limits of where bond vigilantes start protesting, though US yields would not be at current levels if the economy were not performing.
"You are on a bus called the 30-year bond and there is a cliff coming, but you don't know if it is 100 metres away or 100 miles away," Matt Eagan, a portfolio manager at Loomis Sayles, told the New York Times.
Total US government debt is up roughly US$5tn in two years, Eagan said.
