U.S. Treasury yields remained elevated on Thursday as the country’s growing fiscal deficit became a key concern for investors this week.
At 3:40 a.m. ET, the 30-year Treasury yield held steady at 5.09%, a high not seen since November 2023. The 10-year yield declined just over one basis point to 4.58%, while the 2-year Treasury yield was lower by over 2 basis points to 3.99%.
One basis point is equivalent to 0.01% and yields move inversely to prices.
Investors have paid close attention to the U.S.’ budget deficit this week amid a series of blows, including Moody’s decision to downgrade the country’s credit rating by one notch, and U.S. President Donald Trump’s massive budget bill.
Trump’s “big beautiful bill” has caused much negotiation and debate on Capitol Hill, and is estimated to add $3 trillion to $5 trillion to the country’s debt, which will increase the deficit, put pressure on inflation, and accelerate an already worrying bond market sell-off.
This initial sell-off was triggered by Moody’s slashing the U.S.’ credit rating from Aaa — the highest level — to the second highest level Aa1 on Friday, citing “large annual fiscal deficits and growing interest costs.”
That adds to worries that Treasurys may no longer be a risk-free and safe haven investment.
“You put all that together, and the market is increasing that risk premium for long-term bonds,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “There is a global repricing in a world where there’s just more sovereign debt and a lot more uncertainty about whether policies are going to adjust to make that look attractive.”
Investors will be keeping an eye out for some economic data on Thursday, including weekly jobless claims — which will offer fresh insights into the labor market — and existing home sales.
