The financial markets are sending clear warning signals: long-term U.S. Treasury yields are soaring, bond auctions are becoming less vibrant, while the latest forecasts indicate that the risk of an economic recession is becoming increasingly real.
The Treasury bond market reflects a growing financial anxiety.
The yield on 30-year U.S. Treasury bonds soared to 5.18% on Thursday — the highest level since 2023 — before easing slightly at the end of the session. Meanwhile, the yield on 10-year bonds also edged up, reaching 4.593%. These strong fluctuations reflect increasing pressure on borrowing costs across the economy, especially in the context of the underperforming 20-year bond auction and escalating concerns about the financial situation of the U.S. government.
The auction of $16 billion in 20-year U.S. Treasury bonds on May 21 fell short of expectations, as demand from investors proved weak. The closing yield reached 5.047% — higher than previous forecasts — indicating that the government must pay more to raise funds. Notably, the bid-to-cover ratio fell to 2.46, the lowest since February, clearly reflecting a decline in market interest.
This less-than-positive outcome quickly triggered a negative reaction in the financial markets: the yield on 20-year bonds surged to 5.127%, while the stock market experienced heavy selling, causing the Dow Jones to plummet nearly 800 points during Wednesday's trading session. On Thursday morning, both the Dow and three other major U.S. indices continued to remain flat in a cautious state.
The pessimistic mindset of investors is being influenced by a series of macro risks, including high national debt levels, unresolved debates about new budget and tax plans, along with a series of negative credit ratings from organizations like Moody's, Fitch, and Standard & Poor's. These factors are eroding confidence in the long-term financial stability of the United States, forcing many investors to require higher yields when holding government bonds.
Additionally, predictive markets are showing a marked increase in concern. According to data from Polymarket, the likelihood of a recession in the U.S. in 2025 is currently priced at 40% – a 21 percentage point increase in just the past few weeks. This figure reflects growing worries about the negative impacts of high borrowing costs, inflation pressures from tariffs, and fiscal risks from public spending policies.
However, despite the increasingly clear warning signals, speculators on Polymarket still predict that the Federal Reserve will keep interest rates unchanged in the upcoming June meeting. This probability is currently priced at 92%, while the chance of a 25 basis point cut is only 7%, and the likelihood of a larger adjustment or rate hike is nearly excluded.
Nonetheless, a positive aspect of the auction was the stable participation of foreign investors, who accounted for up to 69% of the total indirect bid value — a ratio indicating a certain level of interest from outside the United States. On the other hand, limited liquidity along with the fact that the 20-year bonds are not as standard as the 10- or 30-year maturities may have weakened the overall appeal, contributing to a decline in general demand.
Gold has risen 2% against the U.S. dollar over the past week | Source: TradingView
As borrowing costs rise and financial pressures increasingly weigh down, both the market and forecasting models suggest that the economic foundation may be much more fragile than it appears to be stable. In this context, two assets often seen as hedges against instability — gold and Bitcoin — have shown remarkable resilience following the underwhelming 20-year Treasury bond auction.
Gold continues to play its traditional role as a safe haven, even reaching new price peaks, while Bitcoin — although still facing specific volatility — shows greater resilience compared to the stock market, which is under significant selling pressure.
The fact that both gold and Bitcoin have maintained their positions in a turbulent market demonstrates that they are managing the waves of economic concern with remarkable calm — even though each asset carries a completely different risk structure.
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