Bond market repricing signals end of cheap capital era for US fiscal policy

October 3, 2026 at 02:45 PM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

The US bond market is repricing federal debt as the 30-year Treasury yield closed at 5.62% on September 30, its highest since 2002. The 10-year yield sits near 5.3%, while interest on the national debt reached $857 billion over the first nine months of the fiscal year, exceeding Medicare or defense spending. The rise in real yields above 3% signals that capital scarcity is binding again, even as the federal deficit runs near $1.9 trillion.

Key Facts

The 30-year Treasury yield closed at 5.62% on September 30, its highest level since 2002.
Interest on the national debt reached $857 billion over the first nine months of the fiscal year, more than Medicare or national defense spending.
The 30-year real yield has climbed above 3%, its highest level since before the 2008 financial crisis.
The federal deficit is running near $1.9 trillion, with the Congressional Budget Office projecting larger deficits ahead.
The 30-year breakeven inflation rate sits near 2.3%, indicating bondholders expect the dollar to hold its value tolerably well.

Bond Market Repricing

The 30-year Treasury yield closed at 5.62% on September 30, territory last seen in 2002. The 10-year Treasury yield sits near 5.3%. The 30-year real yield has climbed above 3%, its highest level since before the 2008 financial crisis. The 30-year breakeven inflation rate, the market's long-run inflation forecast, sits near 2.3%.

Fiscal Arithmetic

Interest on the national debt reached $857 billion over the first nine months of the fiscal year, more than the government spent on Medicare or national defense. The federal government is running deficits near $1.9 trillion, with the Congressional Budget Office projecting larger ones ahead. Higher yields raise debt-service costs, which enlarge deficits, which require still more borrowing at those same higher yields.

Capital Scarcity

Public deficits and private investment are competing for the same pool of savings. The artificial-intelligence buildout requires enormous borrowing for data centers, chips, and electric power. A 3 percent long-term real yield means capital scarcity is binding again. Near-zero rates from 2008 to 2020 taught borrowers, Congress most of all, to treat capital as basically free.