US Treasury yields have surged above 5% for the first time in years, amid growing uncertainty around the country’s economy. The move is attributed to lingering concerns over fiscal spending plans and mounting debt. Strategists warn that investors may be moving away from US bonds to emerging markets, citing higher yields and lower risks.
The benchmark 10-year Treasury note currently trades at 4.593%, erasing earlier gains. However, yields on longer-term Treasurys, such as the 20- and 30-year notes, have risen above 5.1% and 5.128%. This trend is driven by “relentless” action from yields on long-dated Treasurys.
Experts point to a potential “emerging markets trap,” where rising US government borrowing costs prompt investors to reevaluate the status of American bonds as a safe investment. Russell Mould, an investment director at AJ Bell, notes that half of publicly held Treasurys will soon mature and need to be refinanced at higher rates.
Investors are diversifying their fixed income allocations to other parts of the world, with emerging markets offering attractive yields and lower risks. Strategists argue that this shift is driven by investors’ desire for safer investments, such as those offered by countries like Japan, China, Indonesia, and Malaysia. These nations offer high-yielding bonds with lower risk profiles.
While US Treasury yields continue to rise, some experts believe that the country’s government bonds still offer a level of safety and liquidity unmatched by other investment instruments. However, this notion may need revision as investors become increasingly risk-averse. The surge in US Treasury yields serves as a warning sign for policymakers, highlighting the need to address concerns over fiscal spending plans and debt.
Source: https://www.cnbc.com/2025/05/22/us-treasury-yields-where-investors-are-putting-their-money.html