30-Year Treasury Auction Clears Above 5%, Highest Yield Since 2007

The US Treasury sold $25 billion worth of 30-year bonds on Wednesday, with the auction clearing at a yield of 5.046%.

The sale follows back-to-back US inflation reports this week that pointed to mounting price pressures driven by the US-Iran war.

Iran War Inflation Shock Drives Long-End Yields Higher

According to the Financial Times, the auction marked the first time since 2007 that the US government issued 30-year debt with a yield at 5%.

Meanwhile, secondary-market yields also climbed yesterday after the US Producer Price Index (PPI) Final Demand rose to 6%, the highest reading since January 2023.

The 30-year hit an intraday high of 5.05%, the highest since July 17, while the 10-year benchmark reached 4.49%. The 2-year yield, more sensitive to Fed policy, eased to 3.981%.

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Bond Stress Spills Into Bitcoin and Risk Assets

Rising Treasury yields tighten financial conditions by increasing borrowing costs and boosting the appeal of safer fixed-income investments.

A 30-year US Treasury yield above 5% also raises the opportunity cost of holding non-yielding assets such as Bitcoin and gold, potentially weighing on demand for risk assets.

Meanwhile, markets are now pricing in a 55% probability of a Federal Reserve rate hike by April 2027. This reflects growing investor concern that inflation could remain elevated for longer, forcing policymakers to tighten further rather than ease rates as previously expected.

Higher interest rates further reduce appetite for risk assets by increasing financing costs and tightening liquidity.

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