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The US has paid the highest borrowing costs to sell 30-year bonds since 2001, as investors fret over the country’s mounting debt pile under Donald Trump’s administration as well as inflation that remains stubbornly high.
A $25bn Treasury auction of 30-year bonds on Thursday drew yields as high as 5.22 per cent, according to the US Treasury department. It marked the highest yield since the 5.52 per cent paid in August 2001, after which 30-year auctions were suspended for almost five years.
The yield on Thursday’s auction compares with 5.06 per cent at the previous 30-year sale in July, and 4.91 per cent just before Trump’s second term began in January 2025.
The jolt higher in borrowing costs comes as the US debt pile has swollen to almost $40tn, pushing the debt-to-GDP ratio towards an all-time high. Meanwhile, Trump’s war with Iran has sent prices for consumers and businesses sharply higher, raising the bar for investors to scoop up bonds that will provide consistent interest rates for the next three decades.
“All in all this is problematic for the Treasury. They have to fund the government at more expensive levels,” said Gennadiy Goldberg, head of US rates strategy at TD Securities.
The bond sale comes on the heels of a $42bn auction for 10-year notes on Wednesday, which were sold at the highest yield since 2007.
The national debt — and the cost of borrowing — have roughly doubled over the past decade, fuelled by vast spending during the coronavirus pandemic. The government now spends more on servicing its debt than it does on national defence.
Trump returned to office vowing to bring America’s public finances under control, but nominal debt has since risen at its fastest rate outside of the Covid era, after the administration pushed through sweeping tax-cut legislation with the president’s so-called big, beautiful bill.
Debt held by the public outstripped GDP in the first quarter of 2026, according to government data analysed by the Committee for a Responsible Federal Budget.
According to the Congressional Budget Office, a non-partisan watchdog, the national debt is on track to surpass its post-second world war peak of 106 per cent by the end of the decade and hit 120 per cent by 2036.
The fiscal factors have been compounded by concerns the Federal Reserve will struggle to control a bout of high inflation as an energy price surge triggered by the war in Iran exacerbates the price pressures created by tariffs and booming spending on AI infrastructure.
Annual inflation jumped to a three-year high of 4.2 per cent in May as fuel prices surged at the height of the conflict. It has since receded, falling to 3.4 per cent in July, according to data released this week, but remains well above the Fed’s target.
While investors remain concerned over inflation and elevated borrowing levels, the yields available on long-term bonds have helped keep demand steady.
Thursday’s 30-year auction drew a bid-to-cover ratio — a measure of demand relative to the amount of debt sold — of 2.39. That was higher than the average over the past six auctions, according to Vail Hartman at BMO Capital Markets.
Goldberg at TD Securities added that the figure “tells us there is still demand for longer-dated fixed income, but it’s at a price”.
The Treasury said earlier this month that auction sizes for longer-dated securities will stay at current levels for the next few quarters, which analysts believe will help limit further upward pressure on yields.
“The Treasury department made it clear that they are not going to be increasing coupon sizes for at least the next several quarters,” said Matthew Scott, head of core fixed income and multi-asset trading at AllianceBernstein, referring to US government securities with maturities of two years or longer.
“So I would expect any increased financing needs to continue to come from the very front end via Treasury bills,” he said.
The Treasury’s move towards short-term issuance in recent years makes the country’s overall debt stock more vulnerable to fluctuations in interest rates, since the government must issue those securities more frequently than when it relied more heavily on long-term bonds, Goldberg said.