New York, Aug. 18 (SANA) Rising yields at US Treasury auctions are increasing Washington’s borrowing costs as investors demand greater compensation to finance mounting debt and persistent budget deficits.
Reuters reported analysts as saying that US national debt is approaching a record $40 trillion, while annual fiscal deficits are expected to remain at about 5% to 6% of gross domestic product.
Two recent auctions highlighted the shift. Ten-year Treasury notes were sold at a yield of 4.683%, the highest in 19 years, while a 30-year bond auction produced a yield of 5.216%, its highest level in 25 years.
Long-term yields have climbed amid heavy government borrowing, resilient economic growth and persistent inflation. Investors are also demanding a higher “term premium”—additional compensation for holding longer-dated debt exposed to future inflation and fiscal risks.
The Treasury has increasingly relied on short-term securities, which have been readily absorbed by money-market funds. Analysts expect issuance to remain weighted toward shorter maturities as buyers show greater caution toward long-term debt.
Despite higher yields, recent auctions showed that demand for US government securities remains solid. Investors have not staged a broad withdrawal, but the market has repriced the cost of financing the federal government.
Treasuries offering yields near 5% could attract pension funds, insurers and asset managers seeking long-term, comparatively low-risk returns. Many institutional investors are also required to hold government debt under their investment mandates.
Foreign demand remains under scrutiny because overseas investors play a major role in financing US deficits. However, recent auction data showed no abrupt decline in participation, while US yields remain higher than those offered in Japan and several other developed economies.
Analysts said the results did not indicate a buyers’ strike or aggressive selling by so-called bond vigilantes. Instead, investors appear willing to continue financing Washington—but only at higher returns that compensate for inflation and the country’s worsening fiscal outlook.
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