US debt pressure deepens as long-term bond yields spike to highest since 2007

A sharp sell-off in US government bonds has pushed long-term yields to their highest levels in nearly two decades, reflecting growing unease among global investors.

The yield on the 30-year US Treasury rose to 5.20 per cent, its highest level since 2007, as markets reacted to a mix of inflation concerns and geopolitical tensions. The move highlights how investors are demanding higher returns to compensate for rising risks in the global economy.

A key trigger behind the surge is escalating uncertainty around Iran and the status of the Strait of Hormuz—a vital artery for global oil shipments. Any prolonged disruption in this region could keep energy prices elevated, fuelling inflation at a time when central banks are already struggling to contain price pressures.

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The spike in yields also comes amid a leadership transition at the US Federal Reserve. Kevin Warsh is set to take over as the new chair, and markets remain uncertain about his policy stance. While there is political pressure to cut interest rates, the persistence of inflation could force the central bank to maintain a tighter monetary policy.

Donald Trump has openly called for rate cuts and has previously clashed with outgoing Fed chair Jerome Powell over the direction of monetary policy. However, the current macroeconomic environment suggests that any immediate easing may be difficult.

The bond rout is not limited to the United States. Similar movements have been observed in European and Japanese debt markets, signalling a broader global repricing of risk. Investors are increasingly shifting their portfolios as they reassess inflation trajectories, interest rate expectations, and geopolitical developments.

Rising yields have significant implications for the wider economy.

Higher borrowing costs could impact mortgages, corporate loans and government financing, potentially slowing economic growth. At the same time, elevated bond yields may draw capital away from equities, putting pressure on stock markets.

As markets navigate this complex mix of inflation risks, policy uncertainty and geopolitical tensions, the surge in long-term yields underscores a fragile and increasingly volatile global financial environment.