Trump’s ‘rocket fuel’ rate-cut promise gives way to rising yields and $827 billion debt service
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Treasury yields have surged to multi‑decade highs, pushing federal debt‑service costs above defense spending. President Trump’s pledge to slash borrowing rates has been undercut by tariffs, AI‑related bond issuance, and the Iran war. The rise comes as Trump touts a booming economy despite 1.5% quarterly growth.
Surging Yields
The 10‑year U.S. Treasury yield surpassed 4.7% on Friday, exceeding the level Trump inherited last year, while the 30‑year bond rate hit its highest in nearly two decades. Fed Chair Kevin Warsh, Trump’s pick, acknowledged inflation remains hot but offered no guidance on rate cuts. Trump had promised lower rates would be ‘rocket fuel’ for growth, but borrowing costs keep climbing.
Political Reckoning
Higher rates squeezed the federal budget: debt service costs reached $827 billion this fiscal year, outpacing defense spending. Mortgage and auto loans grew more expensive, fueling voter anxiety ahead of November’s midterms. Trump’s tariffs and AI data‑center bond deals contributed to the rise, while the White House pinned hopes on an Iran resolution to lower oil prices and eventually rates.
What's Next
The Federal Reserve’s September meeting is expected to hold rates steady, with officials uneasy about persistent inflation. It remains unclear whether a swift end to the Iran conflict would cut oil prices enough to reverse the yield spike before the midterms.
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Trump’s ‘rocket fuel’ rate-cut promise gives way to rising yields and $827 billion debt service
