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Bond market jitters rise on 'narrative shift' from positive tariff news to mounting US debt crisis

[Alexandra Canal ](https://finance.yahoo.com/author/alexandra-canal/) · Senior Reporter

Thu, May 22, 2025, 12:20 PM 4 min read

Bond market jitters are back — and this time, it's not just about inflation.

The 30-year Treasury yield ([^TYX](https://finance.yahoo.com/quote/%5ETYX)) climbed as high as 5.15% on Thursday, its highest since 2023 and, before that, levels not seen since 2007, following [a weak Treasury auction](https://www.marketwatch.com/livecoverage/stock-market-today-dow-s-p-nasdaq-eye-lower-open-as-treasury-yield-trades-above-4-5-target-earnings/card/treasury-s-16-billion-auction-of-20-year-notes-is-met-with-lackluster-demand-ALH8AQ01hjrNdYdq5BsU) and renewed fiscal concerns.

The latest leg higher came early Thursday after the House approved [President Trump's sweeping tax reform package](https://finance.yahoo.com/news/the-house-passed-trumps-big-beautiful-bill-heres-how-it-affects-taxpayers-and-businesses-110041500.html), reigniting investor anxiety over the country's worsening fiscal trajectory.

The jump in long-term yields builds on momentum from earlier in the week after [Moody's downgraded its US credit rating,](https://finance.yahoo.com/news/moodys-downgrade-rattles-stocks-but-not-republicans-pushing-trumps-big-beautiful-bill-144448482.html) citing rising deficits and political gridlock.

Since bond prices move inversely to yields, rising yields indicate investors are selling bonds. This behavior runs counter to the typical flight-to-safety response during market turmoil and has fueled worries [of a broader "sell America" trade](https://finance.yahoo.com/news/markets-reassess-sell-america-trade-as-yields-dip-dollar-wobbles-155827850.html).

Wall Street analysts say the volatility reflects a shift in investor sentiment [as recent optimism around trade developments ](https://finance.yahoo.com/news/us-and-china-to-slash-tariffs-for-90-days-as-trump-and-xi-likely-to-talk-maybe-at-the-end-of-the-week-101943792.html)gives way to renewed concern over the nation’s ballooning debt.

And while markets initially shrugged off the credit downgrade, analysts caution the bond market isn’t out of the woods, pointing to rising fiscal uncertainty and stubborn inflation as key factors likely to keep long-term yields volatile in the short run.

_Read more:_ [_How to protect your savings against inflation_](https://finance.yahoo.com/personal-finance/banking/article/impact-of-inflation-savings-185311100.html)

Citi analysts said Monday that the US "fiscal space" is narrowing due to reduced tariff revenues, meaning the government has less leeway to increase spending without worsening its debt outlook. At the same time, the potential for major fiscal expenditure is growing under Trump’s ["big, beautiful" tax bill. ](https://finance.yahoo.com/news/whats-in-trumps-big-beautiful-tax-bill-from-maga-accounts-to-salt-deductions-121553516.html?fr=sycsrp%5Fcatchall)

"We have expected a narrative shift could take place from positive tariff news to negative budget/fiscal issues, which can see another round of 'sell the US': higher back-end yields \[or long-term interest rates\], lower risk assets, and lower US dollar," Citi analyst Daniel Tobon wrote in a note to clients on Monday.

He warned that a sustained move above the 5% level on the 30-year Treasury yield could trigger a broader repricing of fiscal risk, with ripple effects for the dollar and global risk assets.

Trump's tax proposal includes significant cuts to both individual and corporate tax rates and is projected to [increase the national debt by $4 trillion ](https://www.cbsnews.com/news/gop-tax-bill-reconcilation-deficit-moodys-debt-spending/)over the next decade. The legislation now moves to the Senate for consideration.

"The clearest way in which these \[deficit and budget reconciliation\] uncertainties have manifested themselves is through a steeper US Treasury yield curve," Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, told Yahoo Finance on Monday.

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Historically, a steeper yield curve, which occurs when long-term interest rates rise faster than short-term ones, signals

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