30-Year Treasury yield tops 5% after PPI and Iran tensions

The U.S. Treasury sold $25 billion of 30-year bonds on Wednesday, with the auction clearing at a yield of 5.046%. That is the highest yield on a newly issued 30-year Treasury since 2007.

The sale followed recent inflation reports and heightened U.S.-Iran tensions that pushed long-term yields higher. The Producer Price Index Final Demand rose 6.0% year over year, the strongest reading since January 2023, which lifted secondary-market yields.

The 30-year Treasury reached an intraday high of 5.05%, the strongest level since July 17. The 10-year benchmark climbed to about 4.49%. The 2-year yield, which reacts more to expectations for Federal Reserve policy, traded near 3.981%.

Higher long-term Treasury yields increase borrowing costs for mortgages and other long-dated debt and make interest-bearing safe assets relatively more attractive. A 30-year yield above 5% raises the opportunity cost of holding non-yielding assets such as Bitcoin and gold.

Market pricing of Fed policy changed after the inflation data. Traders using the CME FedWatch tool were assigning roughly a 55% probability of an additional Federal Reserve rate increase by April 2027.

The Treasury faces large financing needs, and the sale added supply to the market as investors assessed inflation trends and geopolitical risks. Rising yields tighten financing conditions by increasing borrowing costs across the economy.

The last time the Treasury issued 30-year debt at or above a 5% yield was in 2007.