The bond market’s May meltdown has taken a turn for the worse.

Long U.S. bonds sold off Wednesday, with the 30-year U.S. Treasury bond yield closing at 5.089%, the highest yield since October 2023, following a disappointing 20-year U.S. Treasury auction and a historic sell-off in Japanese bonds. The move above 5% is striking because that has been the general cap on the 30-year for about two decades.

The U.S. 10-year Treasury yield, at 4.595%, also surpassed its own psychological threshold of 4.5%.

A climb in yields offers investors a chance to lock up money now and step away, but it has also battered values of existing bonds. Yields move inversely to bond prices.

While a 4.5% level on the 10-year isn’t as bad as the 5% yields seen in 2007 and in 2023, the volatility in the bond market that has emerged in 2025 erodes confidence in Treasuries as a reliable place to hide out times of stress.

Japanese government bonds have arguably fared worse. The 30-year bond yield surged to 3.1872%, the highest intraday level on record, according to data dating back to 2006. Yields on Japanese 40-year bonds also hit an intraday record. Across the Atlantic, long-dated U.K. government bond yields also rose, though their ascent was less pronounced. They are at their highest levels since mid-April.

Driving the U.S. bond rout is a mix of both structural issues and macroeconomic concerns. Investors who are more sensitive to prices, such as hedge funds and mutual funds, have been dominating the bond market lately—more than price-insensitive buyers like central banks—subjecting government debt to these bigger price moves. On the economic front, President Donald Trump’s tax and spending bill continues to move forward; that’s expected to add $3.3 trillion in debt through 2034. More debt is a bond investors’ nightmare as it threatens a government’s ability to pay it all back.

“We are surprised by the front-loading” of the debt, Tony Rodriguez, Nuveen’s head of fixed-income strategy, told Barron’s. “The main thing is that you’re not really seeing any [government spending] cuts at all.”

Tariffs are another pain point. They are widely expected to drag on U.S. economic growth, which normally would send yields lower as investors seek safety. But a slower economy also has the potential to lower tax receipts, creating a further boost to government debt.

Revenue from U.S. companies paying the import tax is understood to very modestly offset this debt growth. The lack of measurable progress on trade talks recently has heightened investors’ jitters. The overall average tariff rate stands at 17.8%, the highest since 1934, despite Trump walking back some of the original rates, according to Yale University’s Budget Lab.

As a result, these concerns have helped push up the so-called 10-year Treasury term premium. That is the extra yield that investors demand to stash away money for a decade—rather than just repeatedly investing in short-term securities, such as one-month Treasury bills, for 10 years. The term premium’s latest level at 0.7581% is just shy of the record high of 0.8439% hit in April.

The demand for higher yields in Japan comes from a once-in-a-generation shift made by the Bank of Japan to scale back its bond purchases. A weaker-than-expected 20-year auction this week raised concerns that there won’t be enough demand to fill the gap left by the central bank.

It’s the “big bang bond steepening,” wrote the Global Rates & Currencies Research team at BofA Securities. Steepening refers to when long-dated government bond yields rise more quickly than short-term debt yields. “We believe steepening risks are most pronounced in the U.S., followed by Japan, the EA [Euro Area] and the U.K. where we are constructive,” he added.

The bond selloff in Europe is less pronounced, partly because government spending is less of a problem. Germany has announced a historic increase in spending, but investors don’t appear too concerned—likely because the nation’s debt makes up a healthy 63% of gross domestic product, one of the lowest in Europe. Total U.S. debt is 122% of its annual output.

Until the U.S. gets a grip on its spending, don’t expect many dull days in the bond market.