Although the U.S. Treasury announced this Wednesday it would expand buybacks of long-term bonds, trying to push down long-term yields via 'borrow short, repay long,' the effect lasted only a day. The U.S. 30-year yield rose again to 5.249%, approaching a prior high.
U.S. Treasuries were once seen as the safest investment in international capital, with sovereign funds rushing to allocate. Yet the 30-year yield hit a historic low of 0.7% in March 2020 and has now risen sharply. This not only signals deterioration in U.S. fiscal conditions but also shows the dollar facing a trust crisis. Gold rising in tandem with U.S. long-bond yields further indicates declining market trust in the dollar.
Unlike the dollar's trust crisis and asset bubbles, the yuan's share in global trade settlement and foreign-exchange reserves keeps rising. China's 10-year bond yield is only 1.68%, and A-shares have prominent manufacturing attributes and low valuations. These factors make A-shares' future performance likely to be independent of the U.S. bond storm.
This week the U.S. 30-year yield broke the 5.3% mark — not because the economy is rising, but because federal debt has reached $40 trillion. The dollar trust crisis deepens; major central banks' allocation willingness falls, private capital becomes the main buyer, and U.S. debt must offer higher yields to attract funds.
A country's long-bond yield rising is usually read as a warning on its fiscal health. On the eve of the 2007 subprime crisis, the U.S. 30-year yield was 5.059%, with federal debt only $5 trillion. Today federal debt stands at $40 trillion, with net interest spending taking one-fifth of fiscal revenue. This interest-expense self-driving deficit negative loop may dilute the dollar's purchasing power, further intensifying its trust crisis.
