Odd Lots · Thursday, September 3, 2026
Daryl Duffy argues that while inflation is a factor, the primary driver for rising bond yields is the sheer volume of government debt issuance, particularly from the U.S. Treasury. He notes that foreign central banks are not increasing their holdings, leaving domestic discretionary investors to absorb the supply, necessitating higher yields for compensation.
“But today, if you look at forward implied inflation numbers coming from real and nominal bonds, They're not showing alarm bells at all.”
“I think they're looking at the supply relative to the demand. And again, foreign central banks have had all that they need and they're not buying more. And it's mostly domestic discretionary investors that are being asked to take this additional supply and they just need more compensation.”
“It's not, I mean, as Ken Rogoff remarked at lunch, there's a lot of regression to the mean in terms of long-term yields. And things come and go. But what's been coming is more and more bond debt.”