Treasury yields have been climbing steadily, particularly on the long end of the curve, sparking renewed chatter from macro bears who see this as the harbinger of an impending crisis. If you’ve followed my content for a while, you won’t be surprised when I say: this isn’t the disaster they’re hoping for. Let’s break down why yields are rising, debunk some common macro bear arguments, and explore the dynamics behind this shift.
Why Are Yields Rising?
At its core, rising yields boil down to one thing: investor expectations. Specifically, expectations for future growth and inflation are now higher than they were just months ago. As markets anticipate stronger economic performance, this is being priced into the long end of the yield curve.
But there’s more to it than just investor sentiment. Understanding this phenomenon requires addressing two pervasive myths propagated by those forecasting doom: the “debt crisis” narrative and the “lack of demand for treasuries” argument.
Debunking the Debt Crisis Myth
One popular theory among macro bears is that the U.S. is on the brink of a debt crisis, fueled by the notion that our national debt is unsustainable. This view ignores some fundamental principles of monetary and fiscal policy in the United States.
