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The former United States pays the highest bond yields in twenty-five years as national debt nears $40 trillion and deficits soar. {The Telegraph 14 August}
https://www.telegraph.co.uk/gift/18f5ae5793fd4b3c
FTA: The US has paid the highest interest rate on newly issued bonds in a quarter of a century as the American national debt soars.
The treasury sold 30-year US government bonds at an interest rate of 5.216pc on Thursday, the highest borrowing cost seen in a debt auction since 2001.
It came hot on the heels of another auction on Wednesday, where 10-year US bonds were sold at an interest rate of 4.683pc, the highest since 2007 for Treasuries of that duration.
Washington is being forced to offer higher returns to investors as the US national debt pile nears $40tn (£29.6tn).
The US debt-to-GDP ratio stands at more than 121pc, and Washington now pays more to service its national debt each year than it spends on defence.
James Athey, a fund manager at Marlborough, said: “The US is running a record peacetime deficit while unemployment is low, and the economy is still growing at around trend.
“This is an incredibly worrying situation for a major economy to be in and strongly suggests that the economy isn’t as robust as many are making out. It also means that, should a recession occur, the deficit would blow out significantly, creating real challenges for government funding.
“This large deficit also means that the US government is having to raise a lot of funding each year, meaning more bond supply and further upward pressure on yields.”
Mr Athey also suggested that concerns about the credibility of the US Federal Reserve (Fed) were pushing up borrowing costs.
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