30-year Treasury yield tops 5.33%, new 19-year high on inflation, spending concerns

Treasury yields were little changed on Tuesday after long-dated bonds hit their highest level in almost two decades amid a worsening U.S. fiscal situation and persistently higher inflation.

The yield on the U.S. 30-year Treasury bond fell more than 1 basis point to trade at 5.294%. It hit a new 19-year high earlier in the day.

The 10-year Treasury note yield — the main benchmark for mortgages, auto loans and credit card debt — was more than 1 basis point lower at 4.712%.

The yield on the 2-year Treasury note, which typically reacts in line with short-term Federal Reserve interest rate decisions, moved down more than a basis point to 4.171%.

One basis point equals 0.01%, and yields and prices move inversely to one another.

The moves follow news that the U.S. fiscal deficit jumped to $432.3 billion in July, its highest monthly total since March 2021, pushing the year-to-date shortfall to nearly $1.8 trillion. Interest paid to finance the nearly $40 trillion national debt has cost the government about $1.2 trillion this year.

On the inflation side, recent readings have shown low levels of overall price increases in June and July, but the annual rate remains well above the Fed’s 2% target.

Government debt also felt the effects of the ongoing Middle East tensions.

Oil prices rose as the 60-day deadline for the U.S. and Iran to secure a peace deal expired Monday, with Iran ruling out the possibility of an extension, according to state media. A senior Iranian official also told Reuters that Tehran would take an offensive stance if diplomacy with the U.S. fails. 

“Markets have seen growing weakness over the last 24 hours, with bonds and equities slipping thanks to negative geopolitical headlines from the Middle East,” Deutsche Bank’s Jim Reid wrote in a note on Tuesday. “There wasn’t a single catalyst for the declines, but with few signs of the US and Iran coming to any sort of a deal, that meant investors priced in a more extended closure of the Strait of Hormuz.”

Resurging fears around inflation are sending government borrowing costs higher across the globe, with many longer-maturity bond yields hitting multidecade highs. 

The yield on Japan’s 10-year bond scored a 30-year high. Germany’s 30-year bond yield hit its highest since 2011, while the French 30-year government bond yield ticked upward to a post-2008 high. British government bond yields also advanced.

On the economic front, U.S. import prices fell 0.4% in July. Economists polled by Dow Jones had expected a 0.1% gain for the month.

— CNBC’s Jeff Cox and Chloe Taylor also contributed to this report.

Correction: A previous version misspelled Jim Reid’s name.