US Borrowing Costs Soar to 13-Year High Amid Oil Price Surge
US government borrowing costs have reached their highest level since 2007 due to a surge in oil prices, sparking concerns about inflation. The effective interest rate on US government bonds over 10 years, known as the 10-year Treasury yield, rose as high as 5.04%, but has eased back since.
The increase in borrowing costs is driven by worries that inflation caused by the oil price surge will lead to higher interest rates. The US Federal Reserve Chair Kevin Warsh is expected to raise interest rates to combat inflation, but US President Donald Trump opposes a rate hike, having long argued that lower rates are beneficial for boosting the economy.
Higher interest rates and inflation tend to drive up the yields bond investors demand on government borrowing. Bond yields can also be a sign of how much faith investors have in a given government, with a higher yield reflecting less confidence.