US longer-term borrowing costs climbed to their highest level in almost a quarter of a century on Tuesday as a recent sell-off in the Treasury market deepened. The yield on the 30-year US Treasury rose 0.05 percentage points in morning trading in New York to 5.61 per cent, its highest level since June 2002. The 10-year Treasury yield was up 0.04 percentage points at 5.28 per cent, pushing benchmark borrowing costs in the US to another post-2007 high.

A brutal sell-off in bond markets has gathered momentum in recent weeks as surging oil prices fuel inflation and strong US economic data bolster bets on further interest rate rises from the Federal Reserve. Efforts by Treasury secretary Scott Bessent to rein in the sell-off have fallen flat, with the 30-year yield rising from 5.2 per cent in mid-August when he announced an expanded programme of long-term bond buybacks.

“The path of least resistance appears for the term premium to blow out further,” said Arun Sai, a multi-asset strategist at Pictet Asset Management. “Investors are in no hurry to add duration,” he added. Kristina Hooper, chief market strategist at Man Group, said that rising yields in long-dated bonds reflect “increasing concern about fiscal sustainability” as well as higher inflation caused by the energy crisis sparked by the US-Iran war. The US national debt passed $40tn last month, while government borrowing continues to rise at a historic pace.

Laura Cooper, head of macro credit at Nuveen, said that “the long end has little protection against another bout of turbulence”. The price of Brent crude has been more than $100 a barrel for much of September. The US Federal Reserve raised interest rates for the first time since 2023 this month, and investors are pricing four more quarter-point rises over the next year. Despite the sell-off, the S&P 500 was 0.3 per cent lower on Tuesday, and the Nasdaq 100 was up 0.2 per cent.