4. Warnings
4.2 Moody's rating May 16, 2025
Published by Global Banking & Finance Review
Posted on May 15, 2026
By Amanda Cooper, Karen Brettell, Laura Matthews and Gertrude Chavez-Dreyfuss
Bond Markets React to Inflation and Global Events
LONDON/NEW YORK, May 15 (Reuters) - Bond markets are bracing for interest-rate pain in a way they have not in decades, as investors assess the economic costs of the war with Iran and how the global economy will bear those burdens.
U.S. Treasury Yields and Inflation Concerns
Benchmark 10-year U.S. Treasury yields hit their highest in around a year on Friday, two days after the government sold 30-year bonds at the highest yield since 2007, as traders anticipated the Federal Reserve would be forced to hike rates to rein in inflationary pressures stemming from energy shocks.
Rising Treasury yields have a broad impact on other assets around the globe.
Impact on Borrowing and Consumer Behavior
“With sticky inflation, higher rates are going to be here for longer," said Seth Hickle, portfolio manager at Mindset Wealth Management in Indianapolis, who said this would have ripple effects on home buying, corporate lending and purchasing power. Benchmark Treasury yields are the government security most influential to mortgage rates.
4.4 30-year US Treasury yield hits highest level in 19 years
CNN MAY 19 2026
A bond rout is deepening as inflation fears take hold of the Treasury market, threatening to raise borrowing costs across the US economy.
The 30-year US Treasury yield just hit 5.2%, its highest level since 2007, rising on worries about persistent price hikes because of the Iran war. Unsustainable government finances and interest rate hike fears have also sent investors pouring out of Treasury bonds. Yields rise when bond prices fall.
The war with Iran has ignited a global energy shock, with oil and gas prices at their highest levels in four years while the critical Strait of Hormuz remains effectively closed. That has started to seep out into other parts of the economy, including food prices and airfares.
“Bond markets are warning that inflation could prove much stickier than many investors anticipated,” Nigel Green, CEO at deVere Group, said in a note.
The benchmark 10-year yield, which influences mortgage rates, surged to about 4.67%, its highest level in over a year. Bonds are sensitive to inflation, and investors are demanding higher yields to compensate for the risk of higher consumer prices eating into the value of their returns.
The Treasury market helps set borrowing costs across the economy. Higher yields can ripple through to higher mortgage rates, auto loans and rates on business loans. Higher yields can also pose a headwind for the stock market.
The United States isn’t alone – investors have been selling off bonds around the world on inflation concerns. Meanwhile, angst about government spending and persistent deficits continues to linger, prompting investors to demand higher yields to hold long-term government debt. The 30-year UK gilt yield hit its highest level since 1998. Japan’s 30-year bond yield hit its highest level on record.
The rise in yields also reflects investors’ expectations that central banks will need to do more to halt the recent surge in inflation. US consumer prices in April rose at the highest annual rate in three years, according to data from the Bureau of Labor Statistics.
“The forces driving the sell-off – fiscal deterioration, defense spending, sticky inflation, central bank paralysis – are not resolving in the next week. They are getting worse,” Ajay Rajadhyaksha, global chairman of research at Barclays, said in a note.
4.5 Why the US economy is ringing alarm bells?
BBC 21 August 2026
Michael Race, Business reporter, New York
Signs of economic trouble have been building. This week they hit the headlines when US national debt passed the $40tn mark, raising concerns both at home and abroad.
How did we get here?
It took almost 200 years for US national debt to reach $1tn for the first time, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
That milestone back in 1981 was treated as a wake-up call. "At that time, President [Ronald] Reagan told the nation in a televised address, 'If we as a nation needed a warning, let that be it'," she said.
"Jumping to America's 250th year, we are spending more than that just on interest payments on our debt."
Hitting the $40tn milestone was expected - driven by public spending surges under both the Donald Trump and Joe Biden administrations - but it marks another line in the sand.
Ballooning costs for social programmes and other spending have outstripped revenues undermined by tax cuts. Responses to crises such as the 2008 financial crisis and the Covid pandemic have led to increased borrowing.
Add to that higher interest rates in response to recent inflation shocks and the picture begins to look grim.
How bad is it?
At the beginning of Trump's first presidential term in 2016, US national debt stood at just under $20tn. It has doubled in the decade since.
The figure is rising by about $90,000 every second, or $7.8bn a day, according to the Congress Joint Economic Committee.
"What's very different now compared to a decade ago is the level of interest rates," says Eric Swanson, professor of economics at University of California and former senior economist at the Federal Reserve.
"Long-term interest rates in the US are at multi-decade highs - part of that is concerns about inflation, but part of that is concerns about the extreme levels of US government borrowing."
The bond market is demanding higher returns with investors wary of the scale of the US's debt, but also because tech firms borrowing eye-watering sums to spend on AI are competing with the government for investors' cash.
"What happens when interest rates go up is that the funding of the deficit becomes more expensive," says economist Mohamed A El-Erian, a professor at the Wharton School.
Interest payments on government debt are now 15% higher than the same period last year, says El-Erian. They are almost 20% of tax revenue, which is "larger than defence", he adds.
Should I be worried?
The US is nearing its $41.1tn debt ceiling, with debt forecast to climb to about $64tn by 2036, according to the Congressional Budget Office.
So, investor appetite in lending the US government money through buying bonds is "diminishing", Swanson warns, creating a "vicious" cycle, requiring the government to offer ever higher returns to keep investors purchasing its debt.
And higher US borrowing costs inevitably spill over, raising other countries' borrowing costs too. "What happens in the US never stays in the US," says El-Erian.
Charlie Bean, emeritus economics professor at the London School of Economics, says that if the US debt to economy ratio hits a certain point it could start a fire sale of US bonds and lead to financial market turmoil.
"There probably is a point, but unfortunately we don't know where it is," he says.
"It's not as if there's a fixed number that we could say, you know, 'if it gets to 150 percent, you know, disaster will happen, but we're OK if we stay at 145'."
