The yield on the 10-year US Treasury bond has climbed above 5%, a warning sign of a structural fiscal crisis in the United States that could shake every asset class worldwide. The main trigger is America's public debt burden, which has surpassed 40 trillion dollars, combined with a continuously widening budget deficit, forcing the US Treasury to rush out massive new bond issuance. At the same time, a total of more than 8.4 trillion dollars in government debt is approaching maturity and must be rolled over in short order. The bond market is also under pressure from competing for liquidity with the private sector, with investment-grade corporate bond issuance expected to rise to 2.3 trillion dollars, pushing long-term interest rates higher. Although policymakers and the US Treasury have tried to send reassuring signals through their rhetoric, this is starting to fall flat in the eyes of investors. Fiscal pressure is not confined to the United States, as Japan, the United Kingdom, and France all face similarly strained budget challenges, pushing bond yields worldwide toward a repricing to a long-lasting higher level. Leading financial institutions are beginning to advise investors to reduce their weighting in ultra-long-dated government bonds and shift toward real assets with structural hedges against risk, such as gold, high-quality stocks with strong balance sheets, and physical infrastructure tied to AI technology, including the entire power system, energy grids, and data centers. The climb in bond yields from 4.4% to 4.8% and then above 5% serves as a reminder that the fiscal crisis of a major power cannot be resolved with short-term statements alone, not without serious budget reform.
US 10-year Treasury yield climbs above 5% on massive debt issuance, rollover needs, and corporate bond competition, pushing long-term rates higher.
