The US government’s borrowing costs are flashing warning signs that even the most committed risk-on investors are finding hard to ignore. Bank of America’s chief investment strategist Michael Hartnett is sounding the alarm: if the Treasury can’t get long-term bond yields under control, the fallout will hit the dollar, equities, and virtually every asset class that thrives on cheap money.
The 30-year Treasury yield recently crossed above 5% at auction, landing around 5.126%. That’s the highest level in roughly 25 years, a number that would have seemed absurd during the post-2008 era of near-zero rates.
The math that keeps getting worse
US national debt is approaching $40 trillion. Annual interest payments alone now run between $1.4 trillion and $1.5 trillion, a figure that rivals the entire defense budget and then some. Hartnett’s research suggests this trajectory could push total debt to $50 trillion by 2029 if fiscal policy doesn’t change course.
Hartnett frames this dynamic through what he calls “Anything But Bonds,” or ABB. The thesis is straightforward: with yields this elevated and fiscal fundamentals this stretched, fixed income isn’t offering the safety it once did. Investors, he argues, should be rotating toward defensive assets, gold, and positions that don’t depend on yields coming back down anytime soon.
