Treasury yields are already blowing up the CBO’s long-term forecasts, and experts who previously downplayed U.S. debt fears are now starting to worry

The 10-year Treasury yield topped 5% this past week, hitting the highest level since 2007 and blowing way past forecasts for borrowing costs over the next decade.

According to the Congressional Budget Office’s most recent long-term outlook issued in February—before the Iran war spiked oil prices and inflation views—the benchmark yield was seen at 4.1% this year and 4.2% in 2027.

The 10-year yield was expected to hover around 4.3% from 2028 to 2031, then tick up to 4.4% from 2032 to 2036.

In addition to setting the pace on other borrowing costs, yields determine how much the Treasury Department must pay in interest on the U.S. debt, which can accelerate as rates go up.

To be sure, an end to the war in Iran and lower energy costs would help bring yields back down, but that’s not the only source of upward pressure.

The economy is running hotter, and the labor market is tight, meaning higher yields represent some normalization from crisis-era lows.

The $40 trillion in U.S. debt that has accumulated as well as $2 trillion in annual budget deficits that show no sign of improving are also factors.

At the same time, other heavily indebted countries and AI hyperscalers are competing for bond investors’ capital, so auctions require attractive yields to draw sufficient demand.

Then there’s the geopolitical environment.

The recent wars, trade friction, and disasters have produced such frequent shocks that they are no longer seen as one-off events but a sign of a less stable world.

That risk gets priced into yields too.

Add it all up, and the future looks more expensive.

The Committee for a Responsible Federal Budget estimated that if yields remain more than 80 basis points over baseline projections, the U.S. will spend $2.7 trillion on annual interest payments by the end of the decade—more than Medicare or Social Security retirement benefits.

“The real threat is the debt spiral.