Bond Yields Surge Amid Budget Deficits and Inflation Fears

The US government debt yields are surging at a particularly bad time due to various factors. The 30-year bond yield is close to its highest level since the early part of the 21st century, pushing longer-dated debt hard.

A number of variables are contributing to this move, including intensified concerns over the budget deficit that appears set to eclipse its 2025 level, inflation holding above the Federal Reserve's 2% target despite moderating data, and a rash of corporate debt issuance competing with Treasurys for investors' favor.

The rising term premium is also adding pressure, making US debt less attractive to investors. The total government debt is now a hair below $40 trillion, with the public portion soon to hit 100% of gross domestic product.

Market veteran Ed Yardeni said that 'We're kind of testing the outer limits of where the bond vigilantes are really going to start protesting.' He views this as a vote of confidence in the strength of the economy, despite concerns about inflation and oil prices.