U.S. Treasury yields reach 24-year highs as inflation and debt concerns mount

U.S. Treasury yields climbed to their highest levels in more than two decades on Thursday as a global government-bond sell-off intensified. The 10-year yield briefly topped 5.34%, its highest level since April 2002, before easing to about 5.25%, according to The Hill and CNBC. The 30-year yield also reached a 24-year high before retreating to 5.61%.

The rise followed a September U.S. manufacturing survey that showed mounting price pressures. The Institute for Supply Management’s prices index rose 6.8 points to 77.9, while its measure of order backlogs increased 4.6 points to 56.4. Higher oil prices linked to conflict in the Middle East have added to inflation concerns, while investors are awaiting employment and inflation data for further indications about the economy and Federal Reserve policy.

Higher yields raise borrowing costs for mortgages, auto loans and credit cards, and also increase the federal government’s interest expenses. Annual interest costs on U.S. debt have already reached about $1 trillion, according to Fortune.

In a scenario requested by Sen. Jeff Merkley in which interest rates rise to 1 percentage point above its baseline, the Congressional Budget Office estimated that publicly held debt would reach 222% of gross domestic product by 2056, compared with 175% under its current baseline. The agency projected that the total federal deficit would rise to 14% of GDP and economic growth would run 0.1 percentage point below the baseline.