The United States 30-year Treasury yield rose 5 basis points — hundredths of a percentage point — to 5.61%, reaching its highest level since 2002, according to a market commentary published by ForexLive on September 29. Long-dated Treasury yields serve as a reference rate across the financial system, feeding into the pricing of mortgages, corporate bonds and other long-term credit. The milestone also underscores how far long-term rates have traveled from the historic lows reached during the 2020 pandemic.

The report attributed the climb to a combination of inflation, elevated fiscal spending, rising energy prices and a glut of debt, all of which have made borrowing more expensive. It noted that the artificial intelligence capital expenditure boom has absorbed much of the available pool of lendable funds while the US government runs a deficit of more than 6% of — a shortfall well above what was typical in peacetime expansions in recent decades.

Longer-term borrowing costs have risen by more than 30 basis points over the past week and are up roughly 70 basis points since June, when the prospect of peace in Iran briefly appeared. The commentary observed that yields have moved higher almost daily and that demand for US debt appears scarce despite increasingly attractive yields, a trajectory it described as worrying. Higher federal borrowing costs, it added, cascade down to businesses and consumers, sapping future economic growth while adding to the government's own interest bill. Treasury's regular bond auctions offer a recurring public read on just how scarce that demand remains.

No ready solution is in sight, according to the report. The Federal Reserve could raise rates to crush inflation, but it gives no impression of being in a hurry to impose the accompanying economic pain. In Congress, the commentary argued, no base of fiscal conservatism remains: the Tea Party movement is long dead and co-opted by a MAGA-aligned faction that now proposes giving $5,000 to each adult American at enormous cost.

The report said the specific trigger — inflation, spending or capital expenditure — matters little for broader markets: the cost of capital has risen, making investment less attractive and weighing on equities. It described a prevailing mood across markets of hunkering down until after the midterm elections and until a window opens toward a resolution in Iran, with a sense that conditions may need to deteriorate further before enough political pressure builds to address the problem.