Treasury yields (^TYX, ^TNX, ^FVX) are getting pulled higher after Moody's downgraded the US credit rating late last Friday, the 30-year yield has been hovering its 5% benchmark.
Yahoo Finance senior reporter Allie Canal joins the Market Domination team in assessing the bond market's reaction to US debt narratives, especially as lawmakers deliberate over President Trump's "big, beautiful" spending bill in Congress.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
Long-term Treasury yields ticking higher today as investors assess the mounting US debt crisis. For more on the latest bond market action, let's get to Yahoo Finance's Allie Canal. Hey, Allie.
Hey, Jolie. Yeah, bond market jitters are back and this time it's not just about inflation. Long-term Treasury yields are surging to kick off the week after credit agency Moody's downgraded its US debt outlook. The 30-year yield briefly crossed the key 5% threshold on Monday. Now, this is a level that we haven't seen since 2023 before settling just below that mark. The 30-year is currently trading at just around 4.97%. Now, remember, bonds and yields are inversely correlated, meaning rising yields equal falling bond prices. So investors are currently selling their bonds. Typically during periods of uncertainty, investors would pile into the bond market as a safe haven, but this time around they're selling. And according to the sources that I've been speaking with, that's because fiscal fears are now taking center stage. Analysts say that we're seeing a quote, narrative shift from positive trade and tariff headlines to rising anxiety over ballooning deficits and a potential new tax package from President Trump. He's referred to this as his one big beautiful bill, and that proposal could add as much as $4 trillion to the national debt. So it's this growing uncertainty that's pushing what's known as the term premium higher. Now, the term premium, it's basically the extra yield investors demand for holding long-term bonds in a risky or uncertain environment. And if we take a look at short-term yields, so think your two and your five year, those have stayed relatively stable given the Fed is widely expected to hold interest rates steady. But it's the back end of the curve, your 10-year, your 30-year yields, those are the ones that are climbing fast. JPMorgan analyst Kelsey Barrow told me that the steepening yield curve looks a bit different compared to historical norms, primarily given the fact that it's been driven by a lot of these fiscal and policy unknowns. And with recession fears, credit downgrades and fiscal gridlock all in play, some global investors are starting to look elsewhere for more attractive returns. So current policies like tariffs, for example, making it that much harder to attract foreign buyers, and those buyers are likely going to demand higher yields to offset those reduced inflows which will push that term premium higher. So, uh, Jolie, it's basically this ripple effect that we're seeing here. But that 5% um point that we hit with the 30-year yield, that was a critical technical milestone that a lot of analysts have been referring to. So we'll continue to watch those and see if we tick even higher.
All right. Thank you, Allie.
