Treasury Secretary Scott Bessent has a math problem, and the bond market is done waiting for him to show his work.
Long-term US Treasury yields have climbed to levels not seen since 2006, with the 10-year hovering around 4.65-4.7% and the 30-year yield pushing above 5%. When the government’s cost of borrowing money rises that sharply, every financial product tethered to those rates, from 30-year mortgages to corporate debt, gets more expensive too.
The deficit elephant in the room
The Congressional Budget Office projects annual budget deficits of approximately $1.9 trillion, or about 5.8% of GDP for fiscal year 2026.
To finance deficits of that size, the Treasury has to keep flooding the market with new debt. Bessent has shown flexibility on long-end issuance, meaning the Treasury is adjusting how much debt it sells at those painful longer maturities. Instead, he’s leaned more heavily on short-term T-bills, where 3-month notes carry yields around 3.8%.
