The 30-year U.S. Treasury bond has emerged as one of the standout financial assets of 2025. While its performance pales in comparison to the staggering gains seen in AI-related stocks or gold—indeed, its price has remained flat this year—its resilience amid numerous challenges over the past 12 months is nothing short of remarkable. The fact that it is ending the year at nearly the same level as it began is a testament to its surprising durability.
Had someone predicted on January 1st that gold would surge nearly 70% to surpass $4,000 per ounce, Wall Street would experience its biggest tech boom in a quarter-century, and financial conditions would loosen to their most accommodative level in three years, most would have expected long-term bond yields to rise sharply. Add to that forecasts of U.S. inflation exceeding targets for a second consecutive year, a 10% plunge in the dollar, the "term premium" hitting a decade-high, and the erosion of central bank independence amid political pressure, and investors might have braced for disaster.
Yet, despite these headwinds—including the projected trillions added to the U.S. deficit by the "Great Beautiful Act"—the 30-year Treasury yield has held steady around 4.8%, nearly unchanged from the start of the year.
**Investors Flock to 5% Yields** The 30-year yield hasn’t been immune to volatility. The Fed’s 75-basis-point rate cuts this year might have been expected to push long-term yields lower—the 10-year yield did drop nearly 50 basis points. However, persistent above-target inflation has limited the downside for ultra-long-dated bonds. The yield curve has steepened, with the 2-year/30-year spread reaching its widest in four years, though this shift has been driven almost entirely by short-end movements.
On a global scale, U.S. long bonds have outperformed peers, though currency-adjusted returns were dampened by the dollar’s 10% decline. German 30-year yields recently hit their highest since 2011, rising nearly 100 basis points this year, while Japanese 30-year yields also reached record highs, climbing over 100 basis points.
What explains this relative strength? For many investors, a 5% yield on one of the world’s safest and most liquid long-duration assets remains irresistible, even amid macroeconomic noise. Demand from "real money" buyers—pension funds, mutual funds, and insurers seeking to match long-term liabilities—has stayed robust.
**The Duration Dilemma** This demand has smoothed the path for the U.S. Treasury’s 12 monthly 30-year bond auctions in 2025, which raised a total of $276 billion. The average bid-to-cover ratio, a gauge of demand, stood at 2.37, closely matching the 2.38 average of the past 50 auctions since November 2021. Domestic institutional investors absorbed 70-75% of supply, while foreign buyers increased participation in the second half, with November’s share exceeding 15% for the first time since early 2024.
Yet, the Treasury paid yields below pre-auction market levels only three times this year, while offering higher yields in six auctions—reflecting investors’ persistent demand for concessions.
**A Tougher Road Ahead** Despite its resilience, the 30-year Treasury faces steeper challenges in the coming year. The global backdrop for fixed-income duration remains fraught: rising risk premiums, inflation concerns, and debt supply are compounded by fading confidence in the AI productivity narrative and growing doubts about Fed independence. The 30-year bond may confront trials similar to those of 2025—only this time, more severe. Its true test of endurance may just be beginning.
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