US 30-year Treasury yields remained above 5% for 15 consecutive trading days through local time May 27, marking the longest such streak since 2007, according to Yonhap Infomax overseas interest rate data. CCB International chief economist Zhao Cliff and global strategist Zhang Vera stated that yields hovering around 5% are likely to become much more common than in the past. This sustained high-yield environment reflects growing concerns about US fiscal health, particularly following the passage of President Donald Trump's 'One Big Beautiful Bill Act,' which expanded tax cuts and defense spending, increasing the national debt burden and raising risk premiums for long-term Treasury holdings.
Fiscal Policy Drives Long-Term Rate Premium
CCB International analysts explained that while short-term Treasury rates primarily reflect Federal Reserve monetary policy expectations, long-term rates increasingly mirror concerns about US fiscal sustainability. Zhao stated that although a fiscal crisis is unlikely in the near term, persistently high rates could constrain fiscal policy flexibility and lead investors to demand higher long-term risk premiums. The passage of Trump's 'One Big Beautiful Bill Act' intensified these concerns by expanding the national debt burden through combined tax cuts and increased defense and border security spending.
Middle East Tensions Add Upward Pressure
Bank of East Asia (BEA) investment strategist Bosco Wu identified Middle East geopolitical risks as an additional factor pushing long-term rates higher. Wu stated that increased defense spending related to US-Iran conflict and uncertainty over tariff revenues are placing upward pressure on long-term Treasury yields. However, he noted that current 30-year yields at 5.1-5.2% are approaching the upper end of his forecast range, suggesting limited further upside unless inflation surges again and prompts a more hawkish Fed stance.
Fed Expected to Hold Rates at Upcoming FOMC
Markets are weighing the likelihood that the Federal Reserve will keep interest rates unchanged at the upcoming Federal Open Market Committee (FOMC) meeting this week. DWS chief US economist Christian Scherrmann stated that current economic indicators provide no reason to change policy rates at the next FOMC meeting.
Analysts Shift Investment Strategy Recommendations
CCB International assessed that cash, money market funds (MMF), and short-term US Treasuries have become more attractive investments, while long-term Treasuries now offer higher yields but with increased volatility. In equity markets, the analysts forecast that companies generating stable profits and cash flows will gain relative appeal, while growth stocks dependent on high valuations and borrowing will face greater pressure.
FAQ
How long have US 30-year Treasury yields stayed above 5%?
US 30-year Treasury yields remained above 5% for 15 consecutive trading days through local time May 27, representing the longest such streak since 2007.
Why are long-term Treasury yields staying elevated?
Analysts cite growing concerns about US fiscal health following Trump's 'One Big Beautiful Bill Act,' which increased national debt through tax cuts and expanded defense spending, along with Middle East geopolitical tensions that add upward pressure on long-term rates.
