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AFP\/Getty<\/span><\/div>\n<\/div>\nInvestors might have hoped the turmoil that hit financial markets last month was over. But another bout of volatility in US borrowing costs is a sign that worries continue to bubble. <\/p>\n The interest rate on the US government’s long-term debt surpassed the 5% on Monday, before retreating slightly. That was the highest level since October 2023.<\/p>\n It came after Moody’s downgraded the US government’s credit rating on Friday, citing the rising debt over the past decade.<\/p>\n Congress is meanwhile advancing a tax-and-spending bill that would add trillions to the US government’s $36tn in debt. <\/p>\n<\/div>\n When a government wants to borrow money, it usually does so by selling bonds – sometimes called Treasuries – to investors on financial markets. <\/p>\n Investors buy the bond, providing the government with cash, and are typically repaid, plus interest over a number of pre-agreed years. <\/p>\n Just as with a regular loan, bonds perceived to be risky have higher interest rates, also called yields. <\/p>\n Investors who buy bonds are mainly made up of financial institutions, ranging from pension funds to central banks such as the Bank of England. <\/p>\n Some hold on to the bonds until the term of the loan expires, while others sell them to other investors. <\/p>\n<\/div>\n Historically, the US government has been shielded from having to pay high interest rates, because Treasuries have been considered safe.<\/p>\n That is because the US economy has been strong, with stable prices, and the US government was considered a reliable partner, unlikely to default.<\/p>\n The yields on 30-year Treasuries hovered around 3% for much of decade following the 2008 financial crisis. <\/p>\n When it crossed 5% in October 2023, it was the first time it had hit that threshold in 16 years. <\/p>\n The yield on 30-year Treasuries climbed to 5.04% on Monday, up from 4.9% on Friday before the downgrade, before falling back under the 5% mark.<\/p>\n So what are the new risks? <\/p>\n Yields started rising in 2021, as the US was hit by soaring prices after the Covid-19 pandemic. <\/p>\n Concerns reignited last month, after President Donald Trump’s imposition of tariffs globally, which analysts said would hurt the economy and drive up prices. <\/p>\n At the same time, the US has been running up its debt, with little sign of slowdown in sight. <\/p>\nWhat is a government bond?<\/h2>\n<\/p>\n
What’s happening with US bonds?<\/h2>\n<\/p>\n