Concern about America’s financial future reached new levels recently when 30-year Treasury yields rose to their highest levels in two decades.

Analysts warn that the May financial saga shows that without meaningful fiscal reform, the United States risks deeper economic turmoil and a potential recession.

Recommended Stories

• The penny is going away in early 2026: What it means for you and your one-cent coins
• Gas prices: Drop in fuel costs to begin June
• US will never default on its debt, Bessent says

It’s a sharp departure from the traditional perception of Treasury bonds, long considered among the safest investment tools because they have offered limited financial returns compared to the riskier bets like stocks and equities. Those bonds have a reputation for stability because they’re backed by the full faith and credit of the federal government.

Government bonds are essentially loans from investors to the federal government. The process begins when the Treasury announces an auction of a specific dollar amount in bonds — for example, the most recent auction offered $16 billion. The government sets the individual price of the bonds, typically $100, with a maturity timeline typically ranging from one month to 30 years. At the end of the timeline, bondholders are repaid the full face value along with any outstanding interest.

Nearly anyone can purchase government bonds — individuals, organizations, state and local governments, and foreign nations. The largest foreign holder is Japan ($1.1 trillion), with the United Kingdom ($779 billion) and China ($765 billion) ranked second and third.

While there’s been some concern in recent years about foreign governments dumping their shares of U.S. government bonds, the statistics don’t seem to be backing them up. Collin Martin, a fixed income strategist at the Schwab Center for Financial Research, said foreign official holdings of U.S. Treasuries “have been holding steady for years.”

Official Treasury statistics confirmed Martin’s statement, a sign that foreign governments and businesses prefer the stability of the bond market to wild swings in policy.

“[It] is the deepest and most liquid of all government bond markets, with Treasury bonds also perceived as by far and away the safest of all government debt,” Pepperstone senior research strategist Michael Brown told the Washington Examiner.

That reputation for safety seems to be changing, and not for the better.

Treasury yields had been on a steady decline for the past 30 years. Since the COVID-19 pandemic, yields have climbed in response to rising inflation, trade tensions, and mounting concerns about the federal debt.

When bond yields rise, it often means prices are falling — a sign of investor apprehension and anxiety over America’s economic prospects. More importantly, as yields go up, so do interest payments the U.S. government must make on its $37 trillion debt.

Treasury yields are seen by investment funds and advisers as a reflection of borrowing costs for the U.S. and market expectations for inflation and growth.

And the signals right now aren’t good.

S&P Global Ratings downshifted the U.S.’s gross domestic product growth to 1.55% compared to 2.5% at the end of last year. Bloomberg put GDP growth at 1.3% after a survey of 74 economists.

While inflation has cooled, economists worry it may be a sign of a weakening economy. Consumer confidence is down 30% since January, and that drop could be pushing prices down. Delta and American airlines both reported a drop in foreign and domestic flights earlier this year, and hotel prices are also down.

These factors are causing fear in the bond market, pushing treasury yields up and, more importantly, government debt interest payments.

“Even a 1% increase on Treasury yields will cost the government $370 billion per year,” Competitive Enterprise Institute senior economist Ryan Young said. “It is very important to the government to keep Treasury yields as low as possible.”

This year, the U.S. government is expected to spend $950 billion on interest payments alone — more than the entire defense budget, and nearly as much as it spends on Social Security or Medicare.

Tariffs remain the driving force in the pressures looming over the economy.

While President Donald Trump’s administration rolled back certain tariff measures on China and announced trade deals with the United Kingdom and Israel, other countries haven’t been so lucky.

Trump threatened a 50% tariff on the European Union, starting June 1. He suggested that the EU refused to negotiate in good faith on tariffs while also complaining about eurozone tech regulations and lawsuits.

“It’s time we play the game the way I know how to play the game,” Trump said.

He also threatened to slap a 25% tariff on all imported smartphones. The president said “it wouldn’t be fair” to do tech carveouts and hoped the companies would move manufacturing into the U.S.

Trump’s whole tariff plan in his second, nonconsecutive term is in a state of flux. Federal judges ruled the levies broadly illegal, but appeals court judges have allowed them to move forward. But assuming the Trump administration can get the bulk of its tariffs enacted, economists and investment advisers warn that the on-again, off-again tariff war continues to spook consumers, causing them to go into a wait-and-see mode instead of spending money.

That would have a trickle-up effect on the economy.

If consumers decide to spend less money, Martin observed, then it puts businesses and corporations into a bind.

“They either pass along the price increases to the consumers, making us spend more, or they could eat some or all of the tariffs and earn less money,” Martin said. “Either way, it could mean lower corporate revenues and profits.”

In other words, a perfect storm of uncertainty could drive the economy into a recession.

There is a way to avoid a recession, but it’s a path neither party appears interested in taking.

While the House recently passed President Donald Trump’s “one big, beautiful bill,” by a razor-thin 215-214 margin, economists scoffed at the idea that it would lead to a better economy.

Young expressed disappointment that the measure did not include any debt reduction plans, saying it wasn’t good news for the government’s long-term health. He added that the government needed to cut spending so it could balance the budget and start paying off debt.

Those moves could help the U.S. economy and encourage investment in the U.S. bond market.

TRUMP TARIFFS APPEAR DESTINED FOR SUPREME COURT SHOWDOWN

“Ultimately, bond market stability is inexorably linked to stability in the broader economy, which can only be achieved via more coherent and consistent policymaking in Washington D.C.,” Brown said.

“That, though, for now, seems a long shot,” he added.

Taylor Millard is a freelance journalist who lives in Virginia.