10-Year Treasury Yield Hits 5.23%, Highest Since 2007; CBO Warns Debt Could Reach 222% of GDP

The 10-year Treasury yield surged to 5.23% on Friday, the highest since 2007, while the 30-year yield reached 5.49%, the highest since 2004, raising alarms in Congress over the U.S. debt trajectory. With oil prices elevated on Middle East conflict, AI capital expenditure running into hundreds of billions annually, and U.S. debt at $40 trillion, yields have blown past the Congressional Budget Office's February projections of 4.1% for 2026. Annual interest expenses already stand at $1 trillion, with the budget deficit on pace to reach $2 trillion this year. Responding to Sen. Jeff Merkley, CBO Director Phillip Swagel modeled a scenario with rates 1 percentage point above baseline. Under that scenario, the total deficit would reach 14% of GDP by 2056, up from 5.8% expected this fiscal year, and publicly held debt would balloon to 222% of GDP from 101% today. GDP growth would run 0.1 percentage point below baseline, dampening hopes of growing out of the debt.