US long-term borrowing costs rise to 25-year high, as inflation fears hit bond sale – business live

• The $25 billion auction of 30-year bonds yielded 5.216%, a 25-year high, as bond prices fell amid inflation fears and fiscal risk concerns
• Analysts warn that if investors continue demanding greater compensation for inflation and fiscal risks, long-term yields could rise further above 5% levels
• The elevated borrowing costs come as the government faces a growing deficit due to Trump's spending plans and tax cuts, making debt financing more expensive

Summary: US Long-Term Borrowing Costs Hit 25-Year High

Key Developments

US long-term borrowing costs surged to their highest level in 25 years, with the Treasury Department selling $25 billion in 30-year bonds at a yield of 5.216% on Thursday—the highest rate since 2001. This spike reflects investor concerns about persistent inflation and America's growing national debt burden.

Market Implications

The elevated yields indicate bond prices have fallen as investors demand higher compensation for inflation and fiscal risks. Analysts warn this trend could push long-term yields above 5% even if auction demand remains solid. The rising borrowing costs pose significant challenges for funding the growing US deficit driven by President Trump's spending initiatives and tax cuts.

Michal Stanczyk of Allspring Global Investments noted investors are being asked to "absorb a growing supply of government debt globally at a time when deficits remain large." Gennadiy Goldberg of TD Securities called the situation "problematic" for the Treasury, which must now "fund the government at more expensive levels."

Additional Market News

• Eurozone: Q2 GDP grew 0.4%, but employment increased only 0.1%, suggesting economic growth isn't translating to job creation
• Japan: Bank of Japan reportedly eyeing September rate hike to support the weakening yen
• China: New yuan loans contracted by a record 340 billion yuan in July despite lower borrowing costs
• Oil markets: Brent crude rose nearly 1% to $87.88/barrel following reported vessel attacks in the Strait of Hormuz

European markets showed mixed performance with the FTSE 100 down 0.2%.