The 30-year US Treasury yield has returned to crisis levels. Why is it rising? What are the implications? What should you do?
" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/43484270.md" description: "US equities plunged yesterday, with all three major indices sliding across the board: Nasdaq down 1.69%, S&P 500 down 0.68%, and Dow Jones down 0.24%. The reason is straightforward: the yield on the 30-year US Treasury hit an intraday high of 5.338%, marking its highest level since the 2007 financial crisis. Current valuation frameworks, beyond relative metrics like PE and PS, rely heavily on absolute methods assuming perpetual operations and discounting future cash flows; thus, rising long-term rates are pressuring stock prices downward. However, I believe the issues implied by this new high in 30-year Treasury yields..." datetime: "2026-08-19T11:32:20.000Z" locales: - [en](https://longbridge.com/en/topics/43484270.md) - [zh-CN](https://longbridge.com/zh-CN/topics/43484270.md) - [zh-HK](https://longbridge.com/zh-HK/topics/43484270.md) author: "[每天打个新](https://longbridge.com/en/profiles/16231871.md)" generator: "portal-rs" --- #The 30-year US Treasury yield has returned to crisis levels. Why is it rising? What are the implications? What should you do?
Yesterday, the US stock market plummeted, with all three major indices falling across the board: Nasdaq down 1.69%, S&P 500 down 0.68%, and Dow Jones down 0.24%. The reason is simple: the yield on the 30-year US Treasury bond rose to 5.338% during trading, marking a new high since the 2007 financial crisis. The current valuation framework, apart from relative methods like PE and PS, relies heavily on absolute valuation models based on the assumption of perpetual operation, discounting future cash flows. Therefore, rising long-term interest rates put pressure on stock prices, driving them down. However, I believe the implications of the 30-year Treasury rate hitting a new high go far beyond a single day of stock price declines. **The real danger in this round of Treasury movements isn't just that yields have risen, but that short-end yields are almost flat while long-end yields continue to climb—the market is starting to demand a higher price from the US government for "time" itself.** According to official closing data from the US Treasury as of August 18, the yields for 2-year, 10-year, and 30-year Treasuries were approximately **4.19%, 4.71%, and 5.28%**, respectively. On July 17, they were 4.18%, 4.55%, and 5.06%. In other words, over about a month: **2Y remained basically unchanged; 10Y rose by 16bps; 30Y rose by 22bps.** Anyone who has taken ECON101 knows that if it were a simple interest rate effect, the 2Y yield should react more significantly. Currently, however, the longer the maturity, the more the yield rises, showing a very clear steepening curve. This indicates an expansion in term premium and long-term risk compensation, rather than expectations of rate hikes. This shows that the market is not trading "short-term policy rates," but rather **uncertainty about inflation decades into the future, fiscal sustainability, policy credibility, and the risk compensation required to hold long-term US Treasuries.** So, the core points for analysis today are three: Why are yields rising? What will happen? What should we do? **I. Who is pushing up the 30-year Treasury rate after breaking its 2007 high?** **1\. The Trigger: US-Iran Conflict Drives Oil Prices Up, Repricing Tail Risks of Inflation** First, regarding oil prices, looking solely at published inflation data does not actually support a crash in the bond market. July CPI rose only 0.1% month-over-month (MoM) and 3.4% year-over-year (YoY), with core CPI YoY further dropping to 2.5%, and PPI MoM was even 0. But bonds price in the future, not the past. Currently, the US-Iran conflict continues to escalate, with Iran threatening a major counterattack. WTI crude is oscillating at highs between $80-$85. The US energy CPI YoY has already reached 14.7% in July. The market's concern isn't July's inflation data, but the supply risk at the Strait of Hormuz. If this persists, oil prices will once again transmit through the entire chain—transportation, chemicals, manufacturing—pushing previously declining inflation back up. For 30-year ultra-long bonds, **the uncertainty of inflation itself requires a higher term premium for compensation.** This round of long-bond trading isn't about "how high current inflation is," but rather that "the tail risk of future inflation has increased." Thus, even if the Fed has a higher tolerance for inflation and implements a "talk-down strategy" without actual rate hikes, **while short-end rates may not surge, long-term investors will demand higher inflation premiums and policy credibility premiums.** This perfectly explains the "2Y flat, 30Y surging" curve shape—a twisted steepening, essentially reflecting concerns about future inflation levels and long-term risks. **2\. The Root Contradiction: Debt Deficit Negative Loop, Fiscal Risk Being Priced In** If oil and inflation expectations are the trigger (direct cause) for this round's US30Y peak, then the self-reinforcing cycle created by massive scale and fiscal deficits is the root cause. The CBO currently estimates the US deficit for FY2026 will be approx. **$1.9 trillion, accounting for 5.8% of GDP**; public-held federal debt is approx. 101% of GDP, potentially rising to 120% by 2036. Net interest expenditure alone is projected to rise from approx. $1 trillion in 2026 to $2.1 trillion in 2036. This is not a temporary recessionary deficit, but represents a long-term, forced debt expansion. **"$40 trillion massive US debt scale ➡️ Large interest expenditures ➡️ Expanded fiscal deficits ➡️ Rising US debt risk premium ➡️ The US is forced to issue more debt at higher costs"** This is the shadow of "fiscal dominance" that long bonds fear most—as the pressure of rolling over debt grows, the market will continuously demand higher risk compensation. While the US debt scale continues to expand, default risk remains extremely low in the short term. However, if the problem isn't resolved, in 20 or 30 years, the US debt scale will grow to a terrifying number. What happens then carries too much uncertainty, hence investors demand higher long-term risk premiums. **3\. The Invisible Pusher: AI Financing Boom Turns Long-Term Capital into a "Rare Species"** Another easily overlooked incremental factor: AI is significantly boosting capital demand across the entire market. Tech giants are issuing massive amounts of debt to finance GPUs, data centers, power, and AI infrastructure. Corporate bonds and sovereign bonds have different credit ratings, but they compete for the same pool of long-term capital: pension funds, insurance companies, fixed-income funds. Reuters notes that corporate financing driven by AI data center construction is increasing competition for investment capital. The government needs to borrow, and AI giants need to borrow too. Global long-term capital is gradually becoming a "scarce resource." While this factor alone wouldn't push the 30-year Treasury to 5.3%, it has genuinely increased the duration supply in the market, acting as a booster for rising long-end rates. **II. The Damage Goes Far Beyond a Single Day Crash: Two Deep Worries About High Rates** **1\. Growth Stocks Hit First: Davis Double Kill from Valuation Discounting and Financing Costs** Reuters explicitly states that high long-term rates are raising the capital threshold for data centers, energy infrastructure, and industrial investment. The long-end yield is the "risk-free discount rate" for global assets. For the same profit realized in 2035, a mere 1 percentage point difference in the 10-year Treasury yield results in a world of difference when discounted to today's value. For assets like tech, AI, and innovative pharma, where significant value comes from 远期 earnings, the actual rise in long-term rates is itself a killer of valuations. More troublingly, AI is precisely an industry with extremely heavy capital expenditure—data centers, servers, and power require massive financing. Rising rates not only suppress valuations but also raise project financing costs, directly impacting earnings expectations. This is a classic "Davis Double Kill": discount rates go up, earnings expectations go down. **2\. Extreme Scenario: The Alarm Bell from "Fiscal-Dominant High Rates"** Since rates, bond scales, and risks possess self-reinforcing attributes, this vicious cycle is both cause and effect. This is the longest-term, most fundamental risk. Every step up in rates raises the cost for the US Treasury to issue new bonds and refinance old ones. If average financing costs continue to rise over the next few years, interest expenditure will gradually become one of the most rigid items in the federal budget. When the market starts worrying that "the Fed dares not keep rates too high because the fiscal situation can't bear it," the most dangerous feedback loop appears: **rate cut expectations could actually push long-end yields higher**—because the market will assume the central bank is compromising to fiscal needs, leading to higher future inflation and debt risks, thus demanding higher risk premiums. This is a highly counter-intuitive logic: it's not rate hikes pushing up the long end, but rate cut expectations making the long end rise even harder. Once this stage is entered, **it means the bond market begins pricing independently of the central bank, and the US enters an era of "fiscal-risk-driven high rates."** At that point, even if the Fed cuts short-end policy rates, it may not be able to drive long-end financing costs down synchronously, brewing a larger storm. **III. How to Respond?** What if US Treasuries really collapse? Even the US President doesn't know what to do, so how would I? US debt risk is now a clear gray rhino. Usually, it quietly grazes and acts cute, but once it goes crazy, it tramples everyone. But everyone needn't worry too much. Most of the above risk analysis applies to the medium-to-long term. In the short term, this rhino shouldn't go crazy; at most, it might roar a couple of times to throw a tantrum, for the following reasons. 1\. As written before, AI prosperity partially masks US debt risk. If AI significantly boosts US potential growth rates and productivity, nominal GDP growth could partially offset the deterioration speed of the debt ratio, buying time for fiscal issues. (Image source: Article dated Nov 10, 2025) Last night, US stocks crashed hard. Yet, Hynix's announcement after hours of a $40 trillion buyback pulled up global tech stocks, illustrating this point. Currently, although there are some doubts about an AI bubble, the overall trend remains volatile but upward. So, I don't know what will happen decades later, but the possibility of a comprehensive AI crash in the short term is low. 2\. The trigger this time is the US-Iran conflict, which pushed long-end yields to new highs. A double kill in stocks and bonds doesn't fit Jinmao's political demands. Moreover, midterm elections are approaching; he has to pretend, right? So what will he do? He is likely to TACO. According to probability calculations from a certain website, we are currently at the TACO critical point. Previous analysis showed the trigger for this yield spike was the US-Iran conflict and oil prices. As long as TACO occurs, although the logic behind the fundamental factors of US debt risk won't change slightly, if US-Iran peace talks happen, inflationary pressure will ease, leaving room for adjustment in long-end rates. 3\. The US bond crisis didn't appear today. I wrote about it several times last year. The Nasdaq and S&P still went up when they should, hitting new highs when they should. Why didn't anyone mention the US debt crisis when they were rising? The current market is just cycling through various news and themes. Today it's your turn, tomorrow it's his. Therefore, I think there's no need for excessive panic regarding rising long-end yields. As long as positions are reasonable and portfolio risk is within acceptable limits, it's fine. There's a high probability that in a couple of days, some positive news will come out, and everyone will collectively forget. After all, at the end of July, people were already trading July rate hike expectations. I'm not surprised by whatever nonsense this bunch pulls off now. 4\. After spiking last night, US30Y didn't hold ground but fell back, closing down 0.38%, and continued to fall today. This shows significant market divergence; the bullish force on rates is not absolutely dominant. But there is indeed some risk tonight due to the US Treasury auction + FOMC minutes. The latter is easy to understand—it reveals the Fed's current attitude. The US Treasury auction, however, carries some uncertainty. Tonight features the auction of $16 billion in 20-year Treasuries. The liquidity of these 20-year bonds is inherently lower than that of 10-year or 30-year bonds. If the auction fails (in HK IPO terms, meaning insufficient demand, fewer bidders, and oversupply), the bond market will face further pressure, causing yields to rise again. So, those with heavy positions who don't want to gamble can adjust their positions in advance. 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