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The hosts examine rising long-term interest rates despite the Fed cutting short-term rates — a phenomenon that suggests the bond market is independently pricing fiscal risk, term premium, and inflation expectations. The 'bond vigilantes' of the 1990s may be back.
This summary was generated from show notes and public descriptions, not from a full transcript review. Details may contain inaccuracies.
Canon
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The hosts argue that bond market participants are demonstrating a form of institutional courage by demanding higher yields despite political pressure from both parties to keep rates low.
Highlights
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Rising long-term rates during Fed easing cycles signal the bond market is pricing something the Fed cannot control
Despite the Fed cutting rates in late 2024, the 10-year Treasury yield rose from 3.6% to 4.5%. The hosts explain this means the bond market is pricing fiscal risk (growing deficits), inflation risk, and term premium independently of Fed policy.Was this useful?