US government, others face pressure as debt climbs

A long stretch of high yields in long-term bonds is lifting borrowing costs across the world, and the United States is carrying one of the heaviest loads.

Investors want extra pay to hold government debt because they see big deficits, firm inflation, and louder fights over central bank independence.

Yields on long-dated debt have climbed back to levels last seen in 2009, and traders say this shift is tied to expectations that the cycle of rate cuts is almost done and could soon flip to new hikes in some countries.

Investors are worried that politicians do not have plans, or the power, to fix public finances, and they warn that persistent price pressure could limit how central banks react.

Traders who move long-term notes say the appeal depends on fixed payments that stretch across decades, and the longer that money sits out there, the more can go wrong. Bonds with terms of 10 to 100 years offer higher interest than short-term bills to make up for that risk.

When an economy weakens, yields usually fall because investors expect lower policy rates and smaller returns in stocks.

Lately, the US has broken that pattern. The economy is not booming, but it is strong enough to lift share prices to records, while inflation has run hotter than forecasts, and that has pushed long-term yields higher.

Governments face pressure as debt climbs

Global debt hit $324 trillion in the first quarter of 2025, according to the Institute of International Finance. China, France and Germany led the jump.

Governments borrowed heavily after the 2008 financial crisis, then borrowed again during the pandemic. That spree was easy when interest rates sat near zero. It got harder when inflation spiked and central banks lifted policy rates.

Many of them also slowed or reversed their quantitative easing programs. Some are even selling the old bonds they bought during stimulus rounds, which adds more pressure on yields.

Investors say the danger comes if yields stay high while governments fail to fix budgets. Servicing large piles of debt becomes more costly.

In the US, the One Big Beautiful Bill Act from President Donald Trump could add $3.4 trillion to deficits over ten years, based on the Congressional Budget Office. Moody’s Ratings cut the last top US credit score in May because the growing debt and deficit may hurt America’s role as a top destination for global capital.

Tariffs brought in about $240 billion through November 2025 and narrowed the fiscal gap, but analysts say even if those tariffs survive court fights, they are too small to close it.

Politics drive new moves in bond markets

Politics have fueled more of the recent swings. Trump has criticized Federal Reserve Chair Jerome Powell for not cutting rates faster.

Powell’s term ends in May 2026. Kevin Hassett, who runs the White House National Economic Council, is seen as the top candidate to replace him. Investors expect him to favor Trump’s push for lower rates.

Some investors say that risk of political pressure forces them to seek higher yields because a new Fed chair could cut too quickly, spark faster inflation and lift bond yields further.

Traders say the rise in term premia reflects these risks. They want stable markets because bonds help balance out more volatile assets like technology stocks. When long yields rise, mortgages, auto loans, credit cards and other types of borrowing get more expensive. That can squeeze households and weaken growth.

High long-term yields also raise the cost for governments to borrow, which can set off a “doom loop,” where high yields drag economies down and debt keeps growing. Past market pushback forced leaders out, like the fall of UK Prime Minister Liz Truss in 2022, and in the 1990s, bond vigilantes pressured President Bill Clinton to slow debt growth.

Japan’s low bond yields once pulled global yields down, but that anchor is gone. In the UK, Chancellor Rachel Reeves has been working to show markets she can manage public finances while dealing with tensions inside her party.

In the US, investors worry that inflation remains sticky and that new tariffs may add more pressure while also threatening to slow the economy.

That mix could force central banks to choose between slowing inflation or supporting growth. Analysts say stagflation is possible if prices rise while output stalls.

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