US borrowing costs reach a 20-month high as inflation and Middle East conflicts drive up bond yields.
The 10-year Treasury yield reached its highest level in 20 months, marking the loftiest level during President Trump's second term in office. This spike in borrowing costs affects the rates for mortgages, car loans, and credit cards for households and businesses. The increase is driven by renewed strikes in the Middle East, which pushed oil prices above $92 a barrel, and heightened concerns over inflation. Current figures show prices rose 3.4% in the year to July, which is above the Federal Reserve's 2% target. Treasury Secretary Scott Bessent announced that the US government would buy back more debt to lower rates, but the market's reaction to the announcement was short-lived. The national debt has passed the $40 trillion mark, doubling in the space of a decade under both the administration and the Biden administration. Federal Reserve officials have expressed concern over inflation. Michael Barr, a governor at the US central bank, stated that inflation has been too high for five years and warned that the administration should act decisively to raise rates if it does not cool. Kevin Warsh, chairman of the Fed, noted that policymakers would have work to do if they were not confident that cost-of-living pressures were easing.
Sources
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US borrowing costs hit fresh highs over inflation fears
BBC
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10-year yield hits highest since January 2025 as higher oil prices stoke inflation worries
CNBC