US 10-Year Treasury Yield Hits 5% Amid Fiscal Crisis Fears

The benchmark 10-year U.S. Treasury yield surpassed the critical 5% threshold on September 15, 2026, reaching intraday highs of 5.04%. This milestone, the highest since 2007, was driven by a combination of soaring energy prices following a conflict with Iran, a $40 trillion national debt, and heavy corporate borrowing for artificial intelligence infrastructure. The surge triggered a global bond selloff, pushing yields higher in Japan, Germany, and France.

In response to persistent inflation and market volatility, the Federal Reserve System, led by Chairman Kevin Warsh, raised the federal funds rate by 25 basis points to a range of 3.75% to 4% on September 16. This marked the first rate hike since July 2023. Treasury Secretary Scott Bessent attempted to stabilize the market through expanded buybacks of long-dated Treasuries and by encouraging Japan to limit its sales, though analysts described the impact as muted.

The spike in yields has increased borrowing costs across the economy, pushing 30-year fixed mortgage rates toward 7% and increasing federal interest expenses to nearly 20 cents of every dollar of government revenue. While some officials attribute the rise to a strong economy and AI investment, others warn of a looming fiscal crisis. The Committee for a Responsible Federal Budget estimated that annual interest payments could reach $2.7 trillion by 2030 if yields remain elevated, potentially surpassing spending on Social Security or Medicare.