Episode #5
Is there a crisis in the bond market?
Is the U.S. bond market really entering a crisis with “no historical parallel”? In this episode of Cam Harvey’s Through the Noise, Cam Harvey and Robert Olinger examine the headlines surrounding rising Treasury yields and explain why a 10-year yield above 5% needs to be viewed in a much broader historical and economic context. Harvey argues that today’s interest rates are less extraordinary than the near-zero rates that followed the Global Financial Crisis and COVID-19. He examines what the yield curve is signaling about economic growth and uses 10-year Treasury and TIPS yields to show why inflation expectations alone do not explain the rise in long-term rates. The discussion also explores concerns about U.S. government debt and the risk of monetizing that debt through money creation. Harvey explains why market-based inflation expectations are important when evaluating those concerns and why he believes fiscal challenges are not the primary driver of higher Treasury yields. The conversation then turns to what Harvey sees as a key force behind rising rates: competition for capital. With corporations raising significant amounts of financing—particularly to support AI infrastructure and data center investment—investors need higher yields to supply that capital. Harvey connects this dynamic to expected real interest rates, economic growth, corporate bond spreads, and the shape of the yield curve. Finally, Harvey addresses claims that China is abandoning U.S. Treasuries, explaining how offshore custody centers such as Belgium, Luxembourg, and the UK can complicate interpretations of official Treasury holdings data. The central takeaway: a high interest rate cannot be judged as good or bad in isolation. Understanding bond yields requires examining inflation expectations, real rates, capital demand, economic growth, fiscal conditions, and the yield curve together.
