The U.S. bond market is flashing renewed warning signals as long-term Treasury yields surged this week, reflecting growing anxiety over the nation’s swelling deficit and fiscal trajectory. Investors are increasingly wary of the impact of President Trump’s proposed tax bill, which cleared the House and is now headed to the Senate.

Traditionally seen as a safe haven, bonds are now under pressure. The sell-off suggests fears are shifting from market volatility to deeper structural concerns about America’s fiscal health. At the center is the sweeping tax reform package, projected to add $4 trillion to the national debt over the next decade, with limited offsetting spending cuts.

“This is an unsustainable fiscal situation,” said Shai Akabas of the Bipartisan Policy Center. “Higher debt means higher interest payments, which pushes interest rates up across the economy and fuels inflation.”

The 30-year Treasury yield surged to 5.15%, nearing levels not seen since 2007, driven by poor auction demand, rising global fiscal stress, particularly in Japan, and skepticism over the U.S.’s ability to rein in spending. Economists warn that the proposed savings in the bill are largely backloaded and uncertain. “Will they materialize?” asked Deutsche Bank’s Brett Ryan. “The House bill may just be the baseline for even larger deficits.”

The implications are broad. Investors are demanding higher yields to compensate for fiscal risk, and some fear a “sell America” mindset is forming. Meanwhile, inflation and political uncertainty continue to cloud the economic outlook.

“There’s not good news here,” said economist Heather Boushey, adding that the bond market’s message is clear: the U.S. may be heading down a risky fiscal path: one that markets are beginning to price in.

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Source: https://finance.yahoo.com/news/unsustainable-fiscal-situation-wall-street-braces-for-more-bond-market-turmoil-as-trump-tax-bill-stirs-up-deficit-concerns-133059644.html