Quick overview

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Investors secured 5 percent yields on 30-year Treasury bonds as rising energy costs raised inflation expectations for the first time since 2007. A $25 billion auction of new 30-year bonds on Wednesday was awarded at 5.046 percent based on the yields that bidders indicated they were willing to accept.

The outcome demonstrated mediocre demand as the US government yields hit their highest levels in almost a year. It was marginally higher than the level observed in trading just before the auction.

Earlier in the week, demand for three- and ten-year Treasury bonds was also lower than anticipated. To offset the risk that inflation fueled by rising energy prices since the US attacked Iran in late February, cutting off Middle-East oil supply, will accelerate further, auction bidders are requesting higher fixed rates. The oil shock has increased market-based inflation expectations and broad inflation measures, such as the US consumer and producer price indexes.

The last 30-year Treasury to carry a 5% interest rate was sold in 2007, on the brink of the global financial crisis and US economic recession.

No 30-year Treasury has carried an interest rate greater than 4.75% since 2007. The lowest 30-year fixed rate in the past 20 years was 1.25%, set by an auction in May 2020 following the onset of the pandemic.

That bond trades at less than 50 cents on the dollar to entice buyers.

It’s not the only Treasury security to carry a 5% interest rate during the past two decades. Twenty-year bonds, reintroduced by the US government in 2020, have traded at higher yields than 30-year bonds for much of the time since then, reflecting weaker investor demand. As a result, a 20-year bond sold in May 2025 carried a 5% interest rate.