30-Year Treasury Yield Hits 2007 Highs on Debt, AI Borrowing

The 30-year Treasury yield rose three basis points to 5.29% on Monday, the highest since 2007, as a hotter-than-expected Empire Manufacturing reading and rising oil prices extended a global bond selloff.

"We have been arguing against fading the long-end selloff, and we continue to do so," said Anshul Pradhan, head of US rates strategy at Barclays. "A constructive view would require some combination of a downside fiscal surprise, slower AI-related issuance, a shift in Treasury's issuance strategy, and a sustained run of soft activity data."

The move extends last week's slide, which forced the Treasury to sell $25 billion of new 30-year bonds at a yield of 5.216% — the highest for such an auction since 2001. A day earlier, the 10-year auction drew the highest financing cost since 2007 at 4.68%. The 30-year yield closed at 5.27% on July 31, a level last seen in 2007, and the long bond's 5.44% peak that year now looms within reach.

The climb is raising the US government's borrowing costs at a moment when the national debt stands near $39.9 trillion and the fiscal deficit through July reached $1.1963 trillion, up 30.2% from a year earlier. Interest on the national debt hit $857 billion over the first nine months of the fiscal year, exceeding what the government spent on Medicare and the military over the same stretch.

AI Borrowing Now Competes With the Treasury

US technology companies sold $192 billion of bonds by late July, up from $131 billion in all of 2025 and well above the $61 billion five-year average, according to JPMorgan Asset Management. The sector now accounts for 27 percent of all net investment-grade bond sales, and total US corporate issuance reached $1.68 trillion through July, per the Securities Industry and Financial Markets Association.

The buyers are the same pension funds and insurers that fund Washington. Nomura Securities estimates Big Tech borrowing now equals roughly 25 percent of Treasury net bond sales to private investors, a share five times larger than a year ago. "Whoever's issuing, be it a government or a hyperscaler or a non-hyperscaler credit, is now competing with more borrowers. And therefore yields have to be higher," said Tony Rodriguez, head of fixed-income strategy at Nuveen Asset Management.

Corporate paper pays even more. Alphabet priced 30-year debt near 6.4 percent, about 1.15 percentage points above comparable Treasuries, while a bond financing a Meta data center paid over 7.5 percent last month. Bank of America economists attribute about 0.3 percentage point of the 10-year's 0.49-point rise this year to corporate and mortgage bond supply — roughly 60 percent of the move.

Fiscal Path Keeps the Term Premium Elevated

The clearest driver of higher long-term yields is the size of the US national debt, which stood at $39.94 trillion as of Aug. 11. The fiscal deficit widened to $1.1963 trillion through July as higher rates pushed up refinancing costs and tariff refunds and defense spending increased — 30.2 percent more than a year earlier.

The Treasury signaled on Aug. 5 that it could reduce long-term debt issuance in response to oversupply concerns, indicating it would rely more on short-term bills. Barclays estimated the shift would cut net supply of new Treasury notes and bonds by $440 billion this year. But issuing more short-term debt forces the Treasury to refinance more frequently, leaving it more vulnerable to swings in interest rates. "The only clear solution is budget tightening by the US government," said John Pass, a partner at BTG Pactual Asset Management. "Adjusting the mix of short- and long-term debt would amount to an irresponsible stopgap."

Inflation concerns have not been resolved either. July core and headline personal consumption expenditures prices, due Aug. 26 and closely watched by the Fed, are expected to remain above 3 percent, while the consumer price index rose 3.4 percent from a year earlier. Cleveland Fed President Beth Hammack warned on Aug. 13 that companies are showing signs of overheating investment through fundraising and borrowing, adding to upward pressure on prices.

The Fed has kept its benchmark rate unchanged, and markets increasingly expect it to hold through September and the end of the year. The last time the 30-year yield traded near these levels was in 2007, in the early days of the global financial crisis — a reminder that sustained pressure on long-term rates can tighten financial conditions across mortgages, corporate credit and equity valuations. Growth stocks, whose valuations rest on earnings expected years in the future, are most exposed as higher discount rates reduce the present value of those cash flows.

This article is for informational purposes only and does not constitute investment advice.