Yields on 30-year Treasury bonds spiked Friday to levels last seen during the 2007-2009 financial crisis as markets continued to react negatively to fallout from the Iran war and the federal government’s fiscal crisis.
Yields on the 30-year U.S. Treasury note reached its highest level in a year at 5.11%, and was approaching the 5.12% level from June 2007, according to Barron’s. Investors were on edge following two recent inflation readings showing prices rising on goods ranging from gas to food as well as anxiety over the federal government’s profligate spending.
The yield on the 10-year-Treasury note increased by more than 11 basis points to 4.575%, while yields on 2-year-Treasury notes increased 8 basis points to 4.075%, CNBC reported. Investors also appeared spooked by poor demand during three recent Treasury auctions, according to Barron’s.
Prices fall when demand for Treasuries are low and yields rise inversely, reflecting the reality that the government must entice investors with higher interest repayments over time and lower prices to encourage them to buy the bonds.
The Dow Jones Industrial Average was also down 403 points Friday as of this writing, with the NASDAQ and S&P 500 down 75 points and 351 points, respectively, according to CNBC.
Friday’s rise in yields follows Wednesday’s 6% rise in the Producer Price Index (PPI) and Tuesday’s 3.8% increase in the Consumer Price Index (CPI), with both hot readings being caused in large part due to disruptions to supply chains from the blockade in the Strait of Hormuz.
Oil prices remained elevated Friday with the cost for one barrel of Brent crude topping $105 due to the closure of the Strait of Hormuz.
Investors remained jittery about the long-term fiscal health of the federal government, partly contributing to the increasing Treasury rates.
The country’s publicly held debt was $31.265 trillion, while the nation’s Gross Domestic Product (GDP), the total value of goods and services in the economy, was $31.215 trillion. The ratio of GDP to Debt was 100.2%, up from 99.5% in September 2025, according to The Wall Street Journal.
The government now spends $1.33 for every dollar it collects in revenue, with budget deficits running consistently at around 6% of GDP. That figure will continue to rise unless drastic spending reductions are made — which seems unlikely given the lack of serious budget cut proposals making their way through Congress.
Unfunded liabilities including Social Security and Medicare will increase as baby boomers continue to retire, further straining the federal budget. These mandatory spending programs account for approximately 50% of federal spending. Future unfunded liabilities could total as much as $193 trillion, according to a March report from Open the Books.
In 2027, the Congressional Budget Office projects that mandatory spending on Social Security, Medicare and Medicaid, plus interest on the debt, will permanently exceed federal tax revenue, according to a Boyd Institute report. That means every dollar of discretionary spending on programs ranging from defense to research to federal agencies will be completely financed using borrowed money, according to the report.
A decline in the U.S. labor force participation rate is expected to further strain the already bloated federal budget, with the rate dropping to its lowest level since 1977 in March, The Wall Street Journal reported.
The U.S. already spends more on interest payments on the debt than it does on defense spending, according to the Boyd Institute report. This issue will be exacerbated if interest payments the government pays to its debt holders increase.
Profligate government spending prompted former Treasury Secretary Henry Paulson to warn on April 16 that the federal government needed to craft an emergency plan to address a potential crisis in the market for U.S. Treasury bonds.
Paulson warned that as the federal government continues to rack up more debt, investors will demand higher interest rate yields to compensate them for taking on the risk of purchasing Treasury notes as the likelihood that the government can make all its payments on time declines. This in turn would cause the interest the federal government pays to finance its debt to rise, thus making insolvency more likely, a term economists have termed a “doom loop.”
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