The U.S. bond market is sending fresh warning signs. This week, long-term Treasury yields climbed sharply as investors worried about the nation’s growing debt and the potential impact of former President Donald Trump’s proposed tax cuts.
Typically seen as a safe haven in uncertain times, bonds are now facing a sell-off. This unusual shift is raising alarms among analysts who fear a broader move away from U.S. assets—what some are calling a “sell America” trend.
Jeremy Schwartz, Chief Investment Officer at WisdomTree Global, pointed to two major concerns: tariffs and government policy on debt and deficits. “If interest rates rise sharply due to deficit fears and we fail to cut spending, that poses serious risks,” he told Yahoo Finance.
Although deficits have long troubled economists, today’s investor anxiety reflects a mix of new and old challenges. These include stubborn inflation, political uncertainty, and now, the latest version of Trump’s tax plan, which recently passed the House and is heading to the Senate.
Shai Akabas, director of economic policy at the Bipartisan Policy Center, warned that the current path is not sustainable. “We’re seeing very tough conditions in the bond markets,” he said. “The government has to pay more to borrow money, which is raising interest rates across the economy. That, in turn, is fueling the inflation we’ve already been facing.”
The proposed legislation calls for major reductions in both individual and corporate tax rates. Analysts estimate it could add $4 trillion to the national debt over the next ten years. But the bill offers few significant spending cuts to offset the cost, which is unsettling investors.
Brett Ryan, senior U.S. economist at Deutsche Bank, said the House bill likely shows the minimum expected deficit impact. “The Senate could push for even fewer spending cuts,” he said.
Although the bill claims to save more than $1 trillion, most of those savings would occur after the current presidential term. Ryan was skeptical: “Will those cuts ever happen?”
The bond market’s reaction has been swift. This week, the 30-year Treasury yield (^TYX) rose to 5.15%, its biggest single-day jump since 2023. It’s approaching levels not seen since before the 2008 financial crisis.
This spike wasn’t just triggered by U.S. policy. A weak Treasury auction and financial instability in Japan added to the pressure. Comments from Japanese Prime Minister Shigeru Ishiba about Japan’s own debt problems led to a global sell-off in bonds, which affected U.S. Treasurys as well.
“There’s huge uncertainty in the long-term bond market,” said Joe Hegener, Chief Investment Officer at Asterozoa Capital. He described the current volatility as a real risk to both the stock market and the broader U.S. economy.
“What’s happening overseas is making things worse,” Hegener added. “Investors are clearly getting nervous.”
While short-term interest rates have stayed relatively stable—due in part to expectations that the Federal Reserve will keep rates steady—long-term rates are climbing fast. That’s because investors now demand higher returns to take on the growing risks tied to U.S. debt and political uncertainty.
Heather Boushey, a former member of President Biden’s Council of Economic Advisors, said the rising yields could reflect concerns about stagflation—a troubling mix of slow growth and high inflation.
“This isn’t good news,” she said. “The bond market is giving a clear warning: Don’t keep going down this road.”
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