Government borrowing costs have climbed globally as investors demand higher compensation to hold longer-maturity debt. US 10-year yields surpassed 5%, their highest point in nearly two decades, prompting Treasury Secretary Scott Bessent to announce expanded buybacks. Globally, the average yield on sovereign debt has reached 4%, a level last seen in 2007.

Investors' retreat from long-dated government debt stems from mounting fiscal deficits, stubborn inflation, and President Donald Trump's trade war. Governments must compete with technology companies issuing massive debt to fund artificial-intelligence infrastructure. The US is borrowing more to fund over $40 trillion in national debt and a $2.1 trillion annual fiscal shortfall.

While global debt supply has swollen, demand has been curtailed by weaker foreign appetite and central banks reducing holdings. The investor base is shifting toward price-sensitive private buyers. The term premium for 30-year US sovereign bonds has increased by more than 3 percentage points from the 2020 low.

Structural changes in pensions have also shrunk the pool of traditional long-term buyers. Despite risks, Treasuries remain widely regarded as the world's safest securities. A disorderly bond-market selloff can spell trouble for governments reliant on debt markets to finance deficits.