{"text":[[{"start":11,"text":"American taxpayers could be on the hook for billions of dollars in extra interest payments on the back of Donald Trump’s Iran war if US Treasury yields remain elevated, as investors’ fears over rising inflation add to the government’s debt burden."}],[{"start":26.75,"text":"Government borrowing costs at some maturities have reached their highest levels since 2007 in the 12th week of the US-Israeli conflict against Iran, as investors have sold off state debt in anticipation of higher inflation."}],[{"start":41.95,"text":"The yield for the benchmark 10-year US Treasury stands at 4.58 per cent, up from 4 per cent before the start of the war, and 0.45 percentage points higher than the 4.13 per cent baseline set by the Congressional Budget Office, the federal fiscal watchdog, for this year in February 2026. The 10-year is at its highest since January 2025, while the 30-year Treasury reached its highest level since July 2007."}],[{"start":72.85,"text":"A yield of 4.58 per cent for the remaining four months of the current fiscal year, which ends on September 30, would add around $8bn to interest payments, according to calculations made by the FT using the CBO’s models. "}],[{"start":87.85,"text":"If the 10-year yield remained at 4.58 per cent for the duration of the 2027 fiscal year, that would add just over $30bn to the US interest bill. Yields rise as prices fall."}],[{"start":101.5,"text":"The CBO’s baseline projections already showed interest payments more than doubling from $1tn, or 3.3 per cent of projected GDP, in 2026 to $2.1tn, or 4.6 per cent of GDP, in 2036, on the back of expectations that US lawmakers would make little progress in shrinking the yawning deficit. "}],[{"start":123.7,"text":"Treasury secretary Scott Bessent has said the CBO’s projections underestimate the US economy’s capacity to grow under President Donald Trump’s policies. More growth would lessen the interest burden on US taxpayers. "}],[{"start":137.1,"text":"But some big investors worry that the jump in long-dated yields could become self-fulfilling, as a rise in borrowing costs forces governments to borrow even more to service the growing debt bill. "}],[{"start":149.35,"text":"“We are still on a debt path that continues to rise and in that way it is a self-fulfilling cycle, and that is really what the markets are starting to tease out,” said Bill Campbell, a portfolio manager at DoubleLine, who noted that the political will to address the deficit is non-existent. "}],[{"start":166.85,"text":"The sharp rise in long-term interest rates has already sent mortgage rates spiralling, and was crystallised in a 5 per cent yield on a 30-year debt sale for the first time since 2007. The auction was held shortly after the US reported that producer price inflation had risen to 6 per cent in April, its highest level in four years. The surge in producer prices signals US consumers will face rising costs in the coming months."}],[{"start":193.85,"text":"In response to the data, investors sent market expectations for inflation in a year’s time over 4 per cent, and launched the bond market sell-off that has persisted this week. Inflation fears have been exacerbated by a sense on Wall Street that the Fed may be inadequately prepared to raise interest rates if necessary. At its last meeting the Fed maintained its “easing bias” in spite of the 50 per cent increase in oil prices, though there were three Fed presidents who dissented on that language. "}],[{"start":224.15,"text":"“The story about yields rising globally is a story about central banks sitting on their hands. Investors think that central banks are more worried about the economic risks of raising rates,” said Bob Michele, chief investment officer and head of the global fixed income, currency and commodities group at JPMorgan Asset Management. "}],[{"start":244.8,"text":"“The bond vigilantes are back and have taken control of the market. If central banks aren’t going to respond to inflation pressures, the vigilantes will make it more painful for them to borrow.” "}],[{"start":254.95000000000002,"text":"The jump in long-term Treasury yields has fuelled speculation among investors about measures policymakers could take to arrest the trend. Central banks have more influence over short-term market rates through their policy rate than they do over long-term borrowing costs."}],[{"start":269.5,"text":"One option, that the Treasury leans even more heavily on ultra-short-term debt issuance, was “a band aid put over a cut — you are still bleeding”, said Campbell. "}],[{"start":279.5,"text":"There is also talk among Wall Street investors that the Fed could conduct something like its Operation Twist manoeuvre, dating back to the 1960s but also conducted after the financial crisis, where it sells short-term debt to buy long-term debt. Running something like this was not “super straightforward but is doable”, said Robert Dishner, senior portfolio manager at Neuberger Berman."}],[{"start":303.5,"text":"“There really aren’t any silver bullets, it’s about doing a combination of things,” Dishner added, saying it was probably about “managing the pace” of yield rises rather than the level. "}],[{"start":315,"text":"Most investors would much prefer efforts to improve the US fiscal deficit through raising more tax revenue or reducing spending, but doubt there is the political will to close deficits."}],[{"start":326.05,"text":"The US and other big indebted countries are “hemmed in by populist pressures”, said Kenneth Rogoff, Harvard economist and former chief economist of the IMF. "}],[{"start":336.6,"text":"Measures such as shortening debt maturities can lower interest costs in the short term, but risk “a much more acute adjustment later if over the long run, rates rise”, he said."}],[{"start":355.75,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779678123_2097.mp3"}