The US has paid the highest borrowing costs to sell 30-year bonds since 2001, as investors fret over the country's mounting debt pile under Donald Trump's administration and stubborn inflation. A $25bn Treasury auction on Thursday drew yields as high as 5.22%, the highest since 5.52% in August 2001. The national debt has swollen to almost $40tn, pushing the debt-to-GDP ratio towards an all-time high. Trump's war with Iran has sent prices higher, raising the bar for investors to scoop up bonds that provide consistent interest rates for three decades.

The government now spends more on servicing its debt than on national defence. Trump returned to office vowing to control public finances, but nominal debt has risen at its fastest rate outside the Covid era after sweeping tax-cut legislation. The auction drew a bid-to-cover ratio of 2.39, down slightly from last month. The Treasury said it would keep auction sizes for longer-dated securities at current levels, relying more on short-term issues.

Debt held by the public outstripped GDP in Q1 2026, and the Congressional Budget Office projects the national debt will surpass its post-second world war peak of 106% by the end of the decade. Meanwhile, the Federal Reserve struggles to control high inflation; annual inflation fell to 3.4% in July but remains above the Fed's target. Fed chair Kevin Warsh has vowed to take decisive steps, but the central bank has held rates steady. The yield on 30-year bonds in the secondary market jumped to a 19-year high after Warsh avoided providing clear guidance.