Bloomberg Surveillance · Wednesday, September 30, 2026
Analysts are puzzled by the continuous rise in long bond yields, even as the Federal Reserve has been raising rates. This trend deviates from historical patterns and is not solely attributable to the Fed. Factors like a 6% of GDP budget deficit, policy volatility, tariffs, geopolitical events, and changes in Treasury issuance are contributing to a higher risk premium and driving yields up.
“So that tells us that this cycle isn't really. About the Fed. You know, that is a mystery. And I'm sure that you have lots of people who come in here to you. There's an elephant in the room called the debt and the deficit.”
“But that's been true for a very long time. And there's no particular reason to think it's accelerating. Well, during the entirety of this cycle, the answer to that is yes. And there is nothing that changed at the point when long bond yields started to go up.”
“I strongly agree with you that that plays a role in this, but I don't think it's the only. Variable at play. Yes, we're running irresponsible fiscal policy. To have a 6% of GDP budget deficit in an economy that is strong or solid or stable or whatever you want to pick doesn't make any sense.”