US Borrowing Costs Climb Amid $40tn Debt Burden

By Chibuzor Alli

US long-term borrowing costs have risen again after a government intervention aimed at lowering interest rates proved short-lived, with investors remaining concerned about the country’s rising debt.

The yield on 30-year US government bonds had fallen earlier this week after the Treasury Department announced plans to buy back more government debt in an effort to increase demand for bonds and reduce borrowing costs.

However, the yield rose to about 5.27% on Friday, reversing much of the decline from an almost two-decade high of 5.34%.

The rise in bond yields could affect borrowing costs for consumers, including mortgage rates and car loans, while also influencing how much governments and major companies pay to raise money.

Economists said the Treasury’s intervention had provided only temporary relief as investors continued to focus on the scale of US borrowing, with national debt having surpassed $40tn.

John Canavan, lead analyst at Oxford Economics, said the market response to the government’s intervention was “unsurprisingly short-lived”.

He said traders remained focused on the “daunting” levels of borrowing by governments and corporations globally, as well as rising oil prices.

The Treasury’s move was announced earlier this week after long-term borrowing costs had risen sharply.

Treasury Secretary Scott Bessent sought to boost demand for government bonds by buying back some of the debt, with the aim of lowering the yields investors demand.

Following the announcement, the yield on 30-year bonds fell to 5.18% from 5.34%.

However, the decline was not sustained.

“As Bessent himself confirmed, the move is mainly a signalling mechanism, with the Treasury showing it is prepared to step in with yields near current levels,” economists at Capital Economics said.

“It is not necessarily an effective one, however, as much of the initial fall in 30-year yields has now been reversed.”

Governments and companies issue bonds to raise money, effectively borrowing from investors in return for paying interest. The interest rate on bonds is known as the yield.

Bond investors generally demand higher yields when inflation is high or when they expect inflation to remain elevated.

The latest rise in US borrowing costs comes as concerns about the level of global debt persist.

Bessent blamed the previous Biden administration for the current situation, telling US media on Thursday: “We did not get here in a day, we were left with a mess.”