Bond Sell-Off Sparks Higher Borrowing Costs Amid Fiscal Strain

A sell-off in U.S. bonds has led to higher borrowing costs for households as Wall Street watches Kevin Warsh's policy signals at Jackson Hole on August 28.

The gap between the 2-year and 10-year Treasury yields has widened by nearly 29 basis points since June 24, with the 10-year yield trading above 4.7%. This increase in long-term yields is pushing up costs for mortgages, auto loans, and other borrowing.

The average 30-year mortgage rate has risen to 6.75%, while diesel prices have surged 48% year-over-year to $5.46 a gallon, increasing household costs.

Fiscal strain is also keeping investors focused on the long end of the market, with the U.S. deficit projected at 6.4% of GDP and a $2.1 trillion shortfall for the fiscal year through September.