The 5 percent barrier has long since been left behind. This week, the yield on 30-year American government bonds hit 5.6 percent, its highest level since way back in 2002, while the cost of ten-year borrowing rose to its highest level in 20 years. However hard the Treasury Secretary Scott Bessent tries to control it, the interest rate the American government has to pay to finance its vast deficit keeps on rising relentlessly. As it climbs towards 6 percent and perhaps even higher, surely we must soon see a change in the political debate. Three decades of financial complacency will be swept aside – and the politics of deficit reduction will be back. 

The United States is in a better position than most developed economies

The United States is in a better position than most developed economies

We can forget about artificial intelligence, or the rise of the space economy. The only story that really matters on Wall Street right now is the rising cost of debt. Yields on US borrowing have risen relentlessly all year, with the yield on the 10-year note up from 4.1 percent in January to 5.2 percent now. That matters. When you owe $40 trillion, and are adding another few trillion every year, then the amount you have to pay for money makes a big difference. 

Just as importantly, the yield on US Treasury bonds is the benchmark against which every other asset in the world is measured. When the yield goes up, so does the amount demanded to lend to every other government, corporation or individual. As........

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