Gene Frieda
Long-term government bond yields have risen sharply in 2026, with United States long-term real rates close to their highest levels in two decades. Such rising yields could have significance well beyond the bond market. One interpretation is that investors are becoming less willing to finance US government debt, whether because of US fiscal policy, concern about Federal Reserve independence or a broader erosion of confidence in US institutions during the second administration of President Donald Trump.
Scrutiny of market functioning has been heightened by the US Treasury’s announcement in August that it would expand long-end liquidity-support buybacks1. However, at the opposite extreme, Stephen Miran, the former Chair of the US Council of Economic Advisers, who was appointed to that position by Trump, argues that higher real rates are principally a sign of economic strength, reflecting stronger expected growth rather than deteriorating fiscal or monetary credibility2.
Neither interpretation is satisfactory on its own. Four overlapping explanations have dominated the debate. They stress (1) strong demand for capital from fiscal borrowing and AI investment3, (2) higher expected real policy rates, potentially reflecting stronger growth (Miran’s argument), (3) Treasuries potentially losing part of their traditional safe-asset premium and (4) growing safe-debt supply running up against increasingly scarce market making and balance-sheet capacity (Caballero, 2026a, 2026b).
Πηγή: Bruegel