The U.S. has been borrowing at the highest interest rate in 30 years since 2001. What does this tell us?

The U.S. issued 30-year bonds with the highest yield in 25 years. Investors are seriously concerned about the country’s rising national debt under President Donald Trump’s administration, as well as persistently high inflation, according to the Financial Times (FT).

At the August 13 auction for the sale of $25 billion in 30-year Treasury bonds, the yield reached 5.22%. This is the highest level since August 2001, when the yield stood at 5.52%; after that, the issuance of 30-year bonds was suspended for nearly five years, the FT reports, citing data from the U.S. Treasury.

By way of comparison: during the previous issuance of 30-year bonds in July, the yield was 5.06%, and shortly before the start of Trump’s second presidential term in January 2025, it was 4.91%.

The sharp spike in borrowing costs comes as U.S. national debt has risen to nearly $40 trillion, bringing its debt-to-GDP ratio close to a historic high. At the same time, the U.S. conflict with Iran has led to a sharp rise in prices for consumers and businesses. All of this has raised the bar for investors purchasing fixed-rate bonds for the next three decades, the FT notes.

The sale of 30-year bonds took place immediately after Wednesday’s auction of $42 billion in 10-year bonds, which were also sold at the highest yield since 2007, according to the FT.

“Overall, this creates problems for the Treasury. It has to finance the government at a higher cost,” notes Gennady Goldberg, head of U.S. interest rate strategy at TD Securities.

Although investors remain concerned about inflation and high levels of debt, high yields on long-term bonds are helping to sustain steady demand, the FT notes.

The bid-to-cover ratio (a measure of demand relative to the amount of debt offered) at the August 13 auction was 2.39. According to BMO Capital Markets analyst Veil Hartman, this is higher than the average for the past six auctions. This figure “indicates that demand for long-term fixed-income instruments remains strong, but there is a corresponding price to pay,” added Goldberg of TD Securities.

Earlier this month, the U.S. Treasury Department stated that the volume of auctions for long-term securities would remain at current levels over the next few quarters. According to analysts, this will help limit further upward pressure on yields, the FT reports.

“The Ministry of Finance has made it clear that it does not intend to increase the volume of coupon bond issuances (with maturities of two years or more) for at least the next few quarters,” said Matthew Scott, head of the fixed-income and multi-asset trading desk at AllianceBernstein. “Therefore, I expect that any additional funding needs will continue to be met at the very short end of the curve—through Treasury bills,” he added.

However, as Goldberg notes, the Ministry of Finance’s shift toward issuing short-term securities makes the country’s overall debt portfolio more vulnerable to interest rate fluctuations, since the government has to roll over this debt much more frequently than when relying on long-term bonds.

The FT notes that the national debt and debt-service costs have roughly doubled over the past decade. This was driven by unprecedented spending during the coronavirus pandemic. As a result, the U.S. government now spends more on servicing its debt than on national defense.

Donald Trump returned to office with a promise to get the government’s finances under control. However, since then, nominal debt has been growing at the fastest rate since the Covid-19 pandemic—largely as a result of the passage of a sweeping tax cut bill (part of the president’s so-called “Big Beautiful Bill”).

According to government data analyzed by the Committee for a Responsible Federal Budget (CRFB), outstanding federal debt exceeded the country’s GDP as early as the first quarter of 2026. According to projections by the nonpartisan Congressional Budget Office, by the end of the decade, the debt will surpass its post-World War II peak (106% of GDP) and reach 120% by 2036.

This article was AI-translated and verified by a human editor