The bond market, typically quiet and uneventful, sent a loud warning to Washington on Wednesday and Thursday. The 20-year bond auction saw the lowest demand since February, with investors seeking higher-than-expected yields to compensate for taking on the risk of lending to the US government.
This unexpected move suggests that investors believe the Trump administration’s tax cut bill has made America an unacceptably risky investment. In response, the 10-year Treasury yield rose above 4.61%, and the 30-year yield eclipsed 5.14%, its highest level since October 2023.
The stock market is taking note of this trend, with the Dow flat on Thursday after a significant tumble the previous day. The broader S&P 500 fell 0.1%, while the Nasdaq gained 0.1%. Higher bond rates could have far-reaching consequences for everyday Americans, including increased costs for mortgages, credit card rates, and auto loans.
Treasury Secretary Scott Bessent downplayed the concerns, stating that the economic benefits of the tax cuts outweigh the debt problems it creates. However, experts warn that foreign investors may not be willing to finance US twin deficits at current prices, sparking fears about the country’s fiscal risks.
As the bond market continues to fluctuate, policymakers must address the growing concerns about the national debt and potential implications for future safety net programs, including Medicaid. With the debt ceiling set to increase soon, investors’ demands for higher yields could lead to increased costs for consumers and further undermine the tax cut bill’s ability to stimulate the economy.
Source: https://edition.cnn.com/2025/05/22/investing/bond-market-selloff