Yields on 10-year Treasuries hit the widely watched and psychologically significant 3 percent level Tuesday for the first time since January 2014, continuing a months-long climb that has been driven by expectations of rising inflation and the possibility that the Federal Reserve might quicken its pace of rate hikes in response.
Higher interest rates increase the cost of government borrowing, making it more expensive to service the growing national debt.
The cost of interest on the debt is projected to grow more quickly than any other major component of the federal budget, according to the Congressional Budget Office, which estimated this month that spending on interest payments will nearly triple by 2028, rising to $915 billion that year.
CBO projected that net interest costs will grow larger than the defense budget by 2023 and exceed non-defense spending by 2025.
Politico’s Ben White puts the rising Treasury rate in long-term perspective:
Yes the 10-year yield is climbing and 3 percent is a big deal. But let's not get crazy. Here's where we are and where we've been the last 50 years. It's not exactly 1981. pic.twitter.com/ZuN3PfzR4t
— Ben White (@morningmoneyben) April 24, 2018
