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The US government’s borrowing costs are flashing warning signs that even the most committed risk-on investors are finding hard to ignore. Bank of America’s chief investment strategist Michael Hartnett is sounding the alarm: if the Treasury can’t get long-term bond yields under control, the fallout will hit the dollar, equities, and virtually every asset class that thrives on cheap money.
The 30-year Treasury yield recently crossed above 5% at auction, landing around 5.126%. That’s the highest level in roughly 25 years, a number that would have seemed absurd during the post-2008 era of near-zero rates.
The math that keeps getting worse
US national debt is approaching $40 trillion. Annual interest payments alone now run between $1.4 trillion and $1.5 trillion, a figure that rivals the entire defense budget and then some. Hartnett’s research suggests this trajectory could push total debt to $50 trillion by 2029 if fiscal policy doesn’t change course.
Hartnett frames this dynamic through what he calls “Anything But Bonds,” or ABB. The thesis is straightforward: with yields this elevated and fiscal fundamentals this stretched, fixed income isn’t offering the safety it once did. Investors, he argues, should be rotating toward defensive assets, gold, and positions that don’t depend on yields coming back down anytime soon.
High yields have a habit of ending market booms. They tighten financial conditions, make corporate borrowing more expensive, and eventually force a repricing of assets that were valued under the assumption that cheap capital would last forever.
The election variable
Hartnett’s warning carries an added dimension: timing. The November 2026 midterm elections create a political backdrop that could amplify market stress. The strategist’s concern is that if the Treasury fails to stabilize long-term yields before the political calendar heats up, the combination of fiscal anxiety and electoral uncertainty could trigger a wave of defensive repositioning.
Bank of America’s own research shows that many investors remain bullishly positioned in risk assets despite the yield backdrop. Few appear to be pricing in the possibility that the Federal Reserve won’t intervene before the elections.
What this means for crypto and broader markets
For equity investors, Hartnett’s message is more direct. The current bullish consensus looks fragile when measured against the fiscal reality of $1.4 trillion in annual interest payments and yields at quarter-century highs. If the Treasury’s efforts to manage the long end of the curve fall short, the correction could be swift, particularly in sectors most sensitive to borrowing costs like real estate, growth tech, and leveraged strategies.
Investors sitting on concentrated risk-asset positions might want to stress-test their portfolios against a scenario where 30-year yields stay above 5% through the back half of 2026. That’s no longer a tail risk. It’s the baseline Hartnett is working from.
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