this post was submitted on 19 May 2025
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https://www.wsj.com/livecoverage/stock-market-today-tariffs-trade-war-05-19-2025/card/u-s-30-year-treasury-yield-touches-5--MFBVfsJ1GbjRKH53AEC5
Please explain the significance of this to someone who’s never bought a bond but has dug through a couch to find spare change for groceries.
US Government Bonds are referred to as “risk free debt” because it is seen as the safest investment in existence. The US has never missed a payment in the whole history of the country.
Because of that all interest rates are related to the bond rate. People are getting nervous that US bonds are no longer trust worthy so they are demanding higher interest rates. This is terrible for the economy because those are the floor of interest rates. Meaning the cost to borrow is going up along with the cost of every thing else.
The lack of triple A status seems to indicate the debt is most definitely not risk-free.
I always would argue with my finance professors that calling it risk free was stupid given that most governments default on their debt eventually, and the US is probably no different