In the United States, rapid growth of government debt and persistently high inflation have led to an increase in the cost of servicing it to multi-year highs. At the auction of 30-year U.S. bonds on Thursday evening, the yield exceeded 5.2%, which is the highest figure in the last 25 years.
Experts are increasingly considering the growth of government debt servicing costs as a problem for the U.S. government under the leadership of President Donald Trump ahead of the midterm elections in November. Experts explain the high yields on U.S. bonds primarily by the rapid growth of government debt, which the Trump administration has been facing for a long time.
According to the latest data from the U.S. Treasury Department, the budget deficit for July alone was about $432 billion. This is almost 50% more than in the same month last year. Since the beginning of the year, the U.S. deficit has reached almost $1.8 trillion.
Growth of debt servicing costs
Financing this rapidly growing debt is becoming increasingly expensive for the U.S. government. According to analyst Yannik Mosbach from the Frankfurt banking house Metzler, the Treasury Department in Washington is already forced to spend about $100 billion per month on interest payments, and this amount continues to grow. According to him, it is only a matter of time before the U.S. debt problem will again be in the spotlight of financial markets.
Relatively high investor demands for yields indicate that creditors are seeking “higher compensation for financing the growing deficit,” analysts at the French bank BNP Paribas write. The situation is becoming difficult for U.S. Treasury Secretary Scott Bessent. He notes: “After years of high inflation and significant government spending, the huge financing costs are increasingly affecting the economy as a whole.”
Comparison with European markets
This week, the auction of 10-year bonds already brought a yield of 4.68%, which is the highest figure since the global financial crisis of 2007. In the open market, the yield on 10-year bonds is almost at the same level. This is significantly higher than German federal bonds, which are currently trading with a yield of 3.14%.
At the same time, European countries are also facing rising borrowing costs. In particular, Germany is dealing with an increase in debt levels and more expensive credit. However, according to the International Monetary Fund (IMF), in 2026, new U.S. borrowings will exceed 7% of GDP, while the IMF forecasts 3.8% for Germany. In addition, the overall level of U.S. government debt is already very high — over 120% of GDP.
Source: Der Spiegel
