Bond market sell-off threatens higher borrowing costs. Here is what it means for your money.

A bond sell-off driven by investor fears over inflation and rising government debt has rattled markets and threatened to raise borrowing costs for everyday Americans looking to purchase a home or car.

The yield on the 30-year Treasury reached 5.3% earlier this week, its highest level since 2007, while the 10-year Treasury yield, which influences mortgage rates, rose to 4.7%, up from 4.2% at the start of the year.

Bond yields and prices move in opposite directions, with higher yields reflecting investors' desire for higher returns on their investments, often amid fears of economic or geopolitical instability.

"Bond markets are sending an equally loud signal," Nigel Green, CEO of financial consultancy deVere Group, said in an email Wednesday. 

"30-year yields at their highest since before the financial crisis are not a footnote to the equity story. They're a warning about the true cost of government borrowing," he added.

What caused the bond sell-off?

Green said the sell-off could reflect a shift in market sentiment as investors come to terms with several forces, including elevated borrowing costs and mounting government debt, which, according to Treasury Department data, is close to hitting $40 trillion.

Instability in the Middle East may have also contributed to the bond rout. Bond yields moved higher on Monday after a 60-day ceasefire between the U.S. and Iran came to an end, with no clear resolution in sight. 

The conflict in the Middle East, now nearing its six-month mark, has sent oil prices higher, elevating inflation concerns. Inflation eased in June and July after hitting a three-year high, but it remains above the Federal Reserve's 2% target.

Is the market stabilizing?

U.S. yields dropped on Wednesday after the Treasury Department announced it would double the size of its bond buybacks from $2 billion to "at least $4 billion," a move aimed at stabilizing the bond market by injecting it with more liquidity. 

The Treasury Department said it would focus its efforts on longer-term bonds, including those with maturities of 10 to 20 years and 20 to 30 years.

"While long-term government bond yields have dropped back a little today, their recent surge suggests investors are losing patience with fiscal profligacy," Jonas Goltermann, a chief market economist at Capital Economics, said in a research note Wednesday.

Recent data on home sales and import prices also came in better than expected, Oxford Economics said in a report Wednesday, putting further downward pressure on bond yields and allowing the market to stabilize.

The economic advisory firm predicts Treasury yields will remain elevated before gradually declining next year.

What do rising yields mean for your money?

Bond yields act as a barometer for interest rates across the economy, influencing everything from auto loans to mortgage rates. When bond yields rise, borrowing costs for consumers increase.

That could present a challenge for Americans, who already report feeling financially strained amid elevated inflation.

While rising yields hurt borrowers, they present an opportunity for savers, said Matt Schulz, chief consumer finance analyst at LendingTree.

They can be "great news for savers because yields on CDs, high-yield savings accounts and other products rise, too," he said in an email.

Schulz encouraged borrowers to seek quotes from different lenders, as offers can vary widely.

"If you don't take the time to shop around, you can end up paying thousands of dollars more than you need to over the life of the loan," he said.