10-Year Treasury Yield Hit 4.8%, Highest Since 2023

Interest rates are on the rise across the yield curve. The 10-year Treasury note closed at a high yield of 4.8%, a level not seen in nearly three years and more than 60 basis points above estimates from the Congressional Budget Office (CBO), while the 2-year Treasury yield is at a near 2-year high of 4.4%. If rates remain this high above projections, it would add an additional $2.3 trillion to the debt over the next decade.

Last month, the 30-year bond reached a 19-year record yield of 5.3% and remain nearly that high despite the Treasury Department’s August announcement to increase the size of its buyback program.

Rising rates are likely due to a combination of factors including the high and rising national debt, inflation compounded by the conflict in Iran, a shift of investments to the AI market, increased international tensions, and possibly greater economic growth expectations.

Rising rates, in addition to being caused by high debt, feed into it. If interest rates were to remain above projections this year and 64 basis points above projections across the yield curve through the decade, it would add an additional $2.3 trillion to the national debt bringing debt to 125% of Gross Domestic Product by 2036, instead of 120%. Higher debt can also slow economic growth, which would boost debt further.

Thoughtful deficit reduction is the best way to reduce interest rates and put the debt on a more sustainable path.