The 30-year Treasury auction is expected to yield the highest rate since 2001, with U.S. long-term borrowing costs exceeding 5% this year.

The issue isn't the level; it's the direction.

After more than a decade of issuing debt at rates near 2%, the U.S. Treasury is rolling over existing debt and financing the deficit at a level that has doubled borrowing costs.

This cannot be resolved by cutting short-term interest rates, because the 30-year segment is driven by bond supply and the term premium.

When the global risk-free asset yields 5% annually for three decades, the cost of carrying any asset priced relative to it rises.

This applies to equities, corporate credit, and emerging market sovereign debt.