30-year US Treasury bond yields hits longest "5% record" since financial crisis, market re-evaluating US debt risk.

The US 30-year Treasury bond yield has continued to stay above 5%, making it the longest period since the 2007 financial crisis, reflecting market concerns about the US fiscal deficit continuing to expand and inflation resilience. Data shows that since the beginning of this year, the US 30-year Treasury bond yield has been above 5% for 27 trading days, accounting for about 19% of all trading days, reaching the highest level since 2007. That year, the yield was above 5% for a total of 50 trading days. It is worth noting that compared to 2007, the current federal funds rate is still about 150 basis points lower, meaning that investors are demanding higher risk premiums to hold US long-term bonds, highlighting the market's increasing concerns about long-term fiscal risks. Industry insiders believe that the main factors driving the continued rise in long-term bond yields include the deteriorating US fiscal situation and the huge financing demand brought by AI infrastructure construction, jointly pushing up long-term funding costs. Tony Rodriguez, head of fixed income strategy at Nuveen Asset Management, said that the large sovereign debt of the US and fiscal deficit are continuously pushing up long-term interest rate levels. Data shows that since 2007, the size of the US bond market has expanded from about $4.5 trillion to about $31 trillion, and the government debt-to-GDP ratio has risen from about 50% to over 100%. The expansion of long-term fiscal expenditures has pushed US annual interest payments above $1 trillion. Although the debt levels of major economies have generally increased since the COVID-19 pandemic, except for the UK, the US 30-year Treasury bond yield is currently higher than Japan, France, and other major developed economies. Fitch Ratings recently warned that the US debt burden is much higher than other countries with the same AA rating. Hoisington Investment Management, which has traditionally been bullish on US Treasury bonds, has also recently changed its stance. The institution stated that larger fiscal deficits and growing capital needs create new structural pressures that could keep inflation and long-term bond yields at high levels. At the same time, the rapid expansion of the AI industry is further intensifying competition in the long-term financing market. It is estimated that the financing related to AI infrastructure has exceeded $500 billion, and the surge in corporate bond issuance is competing for long-term funding sources with US Treasury bonds. Alex Payne, senior portfolio manager at Vanguard Capital Management, said that in recent years, whenever the 30-year Treasury bond yield rose to around 5%, the market would quickly see buying interest. However, now pension funds, insurance companies, and other traditional long-term investors have more investment options, so yields above 5% may become the new normal, and the current yield may not have peaked yet. Rodriguez also pointed out that whether it is the government, super-large cloud service providers, or other companies, they are all competing for the same group of investors in the long-term bond market, leading to significantly intensified financing competition. As of Wednesday, the US 30-year Treasury bond yield is expected to stay above 5% for 12 consecutive trading days, exceeding the record of 11 consecutive trading days in May. At that time, the yield briefly rose to 5.2%, reaching the highest level since 2007. Meanwhile, the real yield of the US 30-year bond (adjusted for inflation) has risen by about 50 basis points this year, approaching 3%, reaching the highest level since 2008. Although the US Treasury Department has increasingly relied on short-term Treasury bill financing in recent years and has kept the size of long-term Treasury bond issuance relatively stable, most primary dealers on Wall Street expect the US Treasury Department to increase the auction size of 2-year to 30-year coupon bonds starting in May 2027 to meet the growing financing demand. Kevin Flanagan, head of investment strategy at WisdomTree, said that when evaluating the value of long-term bonds, the fiscal deficit, debt size, and the potential increase in future bond issuance cannot be ignored important factors. In contrast, although the 2-year to 10-year US Treasury bond yields have recently rebounded, they have only recovered to levels near early 2025. Currently, most institutional investors prefer to allocate to 5-year to 7-year Treasury bonds to reduce the price risk of further rising long-term interest rates. Hank Smith, head of investment strategy at Haverford Trust, said that the company is currently not allocating US Treasury bonds with maturities of 10 years or longer for non-taxable clients and has increased its allocation to short-term US bonds. He pointed out that clients have been concerned about US debt issues for the past 20 years, and the bond market will eventually tell investors whether debt has become a real risk. Smith warned that although there has not been a significant deterioration in demand for US Treasury auctions at present, if fiscal issues continue to worsen, the return of "Bond Vigilantes" to the market could become one of the biggest risks facing both the stock and bond markets in the future.