Treasury yields hit 19-year high

The 10-year Treasury yield topped 5% this week, the highest since 2007, far exceeding the Congressional Budget Office's February forecast of 4.1% for this year.

Multiple forces pushing yields higher

The Iran war spiked oil prices, a tight labor market is driving inflation, and $40 trillion in accumulated U.S. debt plus $2 trillion annual deficits are all putting upward pressure on borrowing costs.

Interest costs could hit $2.7 trillion

If yields stay more than 80 basis points above baseline forecasts, the U.S. will spend $2.7 trillion annually on interest by decade's end, exceeding Medicare or Social Security spending.

Debt spiral risk now 'distinct possibility'

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned that if interest costs fuel more borrowing, a fiscal crisis once considered unthinkable is now possible.

“The real threat is the debt spiral. If interest begets debt, and debt begets interest, eventually debt will spin out of control.”

Former skeptics now sound the alarm

Ed Yardeni, who coined 'bond vigilantes,' previously saw 4% to 5% yields as normal but now worries yields may break above 5%. Jared Bernstein, a former Biden adviser, similarly shifted from debt skeptic to hawk.

“We are starting to worry now that the 10-year US Treasury bond yield may be on the verge of breaking out above 5.00%.”

The math on debt has changed

Jared Bernstein noted that rising interest rates, massive deficits, and political gridlock mean the debt problem is accelerating faster than previously calculated, making action increasingly urgent.

“I can tell you that we're getting closer. And doing so at a rate that even this nonalarmist finds alarming.”