Sana'a – Saba:
A new report from the US Treasury Department reveals the US public debt has exceeded $36.22 trillion. This comes as the government faces the challenge of refinancing $11 trillion in maturing debt—nearly a third of the total—over the next 12 months. This task is complicated by significant volatility and rising yields in bond markets.
Central bank holdings of US Treasury bonds have seen a notable decline, dropping by $17 billion last week and $48 billion since late March 2025.
Factors Driving Treasury Bond Fluctuations
The current unstable state of US Treasury bonds is attributed to several economic and political factors.
With the national debt surpassing $36.22 trillion, concerns are mounting over the government's ability to service its debts, putting upward pressure on bond yields.
US trade policies, including tariffs, can impact inflation and economic growth, which in turn influences bond yields.
Concerns about a potential US economic recession are prompting investors to demand higher bond yields, increasing borrowing costs and straining the US economy.
A recent $16 billion 20-year Treasury bond auction, offering a 5% yield, saw weak demand, signaling a retreat by foreign investors from US bond purchases.
The depreciation of the US Dollar against major currencies, combined with the rising debt, is exerting upward pressure on US bond interest rates.
A sustained decline in US Treasury bonds carries multiple risks for the American economy
Falling bond prices lead to higher yields, meaning investors demand greater returns. This could result in a long-term increase in interest rates.
Elevated government bond yields raise borrowing costs for the US government itself, as well as for private investors and corporations, potentially impacting government spending and private investment.
Higher borrowing costs could exacerbate the government's debt burden, potentially leading to future tax increases or spending cuts.
Rising interest rates can curb consumer spending and investment, thereby slowing economic growth.
Persistent declines in bond prices could escalate credit risk for the US government. While the US dollar is a global reserve currency, a continuous rise in US debt could erode confidence, potentially causing a setback for the US economy.
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