The Trump administration’s policies are helping keep U.S. bond yields elevated, undercutting the White House’s own efforts to bring them down, according to a CNBC analysis. With President Trump unlikely to change his approach, meaningful interest-rate relief may only come from a weaker economy — a trade-off that would cool borrowing costs but at the expense of U.S. growth.
The yield on the 10-year U.S. Treasury note has climbed roughly three-quarters of a percentage point over the past six months, recently hovering near 4.8%, the highest level of the second Trump administration. Attempts to lower yields, including Treasury buybacks of long-term debt set to expand next week, have so far failed to reverse the upward trend, the report noted.
A more price-sensitive buyer base
The investor base for U.S. debt has become increasingly price-sensitive as central banks and official reserve holders have retreated from buying, giving more influence to private-sector investors. Some global investors have begun shunning Treasurys because policy changes under Trump have worsened the economics for them, CNBC reported. That adds to concerns about a competition for capital between the government’s heavy deficit spending and the surge of corporate debt issuance funding artificial-intelligence infrastructure.
Ludovic Subran, chief investment officer and chief economist at Allianz, said in an interview that investors are simply asking for more compensation to lend to the U.S. — a matter of “pure economics,” not politics. He pointed to “soaring deficits, Fed unfazed by inflation, Treasury tampering with markets” as factors that have added something resembling credit risk to U.S. debt. Subran said Allianz, like many global investors, has had to pay more to hedge its U.S. exposure and has reduced its buying of duration in the U.S. fixed-income market because, after accounting for inflation and hedging costs, “we were not making money.”
The U.S. is projected to hit its $41.1 trillion debt limit between late-winter and mid-summer 2027, according to the report.
Higher yields hit households
The rise in yields is adding to the frustration of Americans already grappling with affordability issues. Mortgage rates have climbed to nearly 6.8%, and because mortgage rates track the 10-year Treasury yield, other forms of consumer debt, including auto loans, have also moved higher.
There is little sign of the political drivers easing. Oil-price declines could provide some relief, but an end to the Iran war remains elusive, and Washington shows no appetite for the compromises needed to reduce deficit spending, CNBC noted. At a gathering of global finance ministers and central bankers in North Carolina this week, political tensions with Canada flared, and coordinated action to lower borrowing costs was not on the agenda.
Big investors shift away
Some large holders are considering reducing their Treasury exposure. Norway’s sovereign wealth fund is weighing a shift of roughly $80 billion from government debt into other parts of the bond market, such as mortgage-backed securities.
Meanwhile, the U.S. government’s borrowing needs continue to grow. The Congressional Budget Office recently revised up its deficit projection for this fiscal year to $2.1 trillion, a level likely to exceed 6% of gross domestic product — an enormous volume of borrowing outside crisis periods.
Corporate borrowing is adding to supply pressures, particularly at the long end of the curve. JP Morgan estimates that five major tech firms plus Nvidia, along with special-purpose vehicles used to backstop data-center leases, have issued about $320 billion in debt so far this year. Michael Cembalest, chairman of market and investment strategy for J.P. Morgan Asset Management, wrote to clients that hyperscalers are issuing so much debt they “may be causing a supply-demand issue at the long end of the yield curve.”
But the AI-driven borrowing boom is not necessarily a negative, the report said. AI is a bright spot in an economy that otherwise is struggling for growth. GDP expanded at an annualized 1.5% in the second quarter, a weaker-than-expected figure likely dragged down by the sharp slowdown in immigration following Trump’s crackdown. The labor market has shown unusual patterns, with Friday’s payroll report showing 162,000 jobs added amid a broader environment where employers are reluctant to hire or fire.
What rising real yields signal
The competition for capital could spur an innovation boom as firms vie for market favor, and that possibility is one explanation for the rise in real yields, which strip out inflation. The yield on 10-year Treasury Inflation-Protected Securities (TIPS) has jumped 67 basis points in six months, to 2.43% on Thursday, according to FactSet data, while breakevens — a measure of inflation expectations — have stayed flat.
New York Federal Reserve President John Williams told CNBC that the rise in real yields is “more of a reflection of the strength of the economy,” arguing against the view that higher yields are dragging on growth. “It’s not really about financial conditions affecting the economy. It’s more about the economy affecting financial conditions,” he said.
The flip side of Williams’ analysis is that it may take an economic slowdown to bring borrowing costs down — a remedy that few would welcome.
Source: www.cnbc.com — https://www.cnbc.com/2026/09/04/treasury-bonds-yield-trump-ai-mortgage-rates-analysis.html
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