# What's Behind the Bond Market Rollercoaster

An episode of [Big Take](https://invisiblenetwork.ai/podcast/1578096201), 19 Aug 2026, 20 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/825d4e29-b616-46f4-afd7-ae2b0013005c/3845b9ff-3a36-4b68-be6d-b4ab01740c13/audio.mp3?utm_source=Podcast&in_playlist=8b1dd624-a026-43e9-8b57-ae2b00130066

On today’s Big Take podcast, Stacey Vanek Smith and Bloomberg Opinion’s John Authers unpack the bond market rollercoaster: a sell-off, the highest US 30-year bond yields since the financial crisis — and a sudden intervention. Read more: The 30-Year Itch Comes for Bonds — and Brazi Further listening: What Higher Bond Yields Mean for Markets and Everyday Borrowers (Big Take Podcast) We have a special Bloomberg subscription offer for podcast listeners at Bloomberg.com/podcastoffer. Hosted by Stacey Vanek Smith; Produced by Rachael Lewis-Krisky and Victor Swezey; Guest: John Authers; Fact-checking by the Big Take team; Engineering by Zoltan Sindhu and Alex Sugiura. Senior Producer and editor: Naomi Shavin; Deputy Executive Producer: Julia Weaver. Executive Producer: Nicole Beemsterboer. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. There's a market symbolism
[0:10] Speaker 1: that I'm in green and staces in red. Actually, oh,
[0:13] Speaker 1: if you want to get if you want to get
[0:15] Speaker 1: a broaders broadish shop.
[0:18] Speaker 2: John Arthurs is an opinion columnist at Bloomberg and friend
[0:20] Speaker 2: of the show. John. Thank you for joining us.
[0:23] Speaker 1: It's a pleasure to be here.
[0:24] Speaker 2: If you were at a dinner party with people who
[0:26] Speaker 2: did not know that much about bonds and they asked you,
[0:29] Speaker 2: why should we care about this? Right now, I'm hearing
[0:31] Speaker 2: a lot about this, what would you say?
[0:33] Speaker 1: Okay, first of all, you seem to have a remarkably
[0:35] Speaker 1: good insight into my social life. I'm very very impressed
[0:39] Speaker 1: by people. I'm afraid to say that. I would say
[0:43] Speaker 1: you need. It needs to matter because globally, no number
[0:48] Speaker 1: matters more than the ten year treasury yield. And it
[0:51] Speaker 1: matters because it's not just about how much Uncle Simon
[0:56] Speaker 1: has to pay to borrow, but it is treated across
[0:59] Speaker 1: the world as the closest approach we have to a
[1:02] Speaker 1: risk free rate. The US government is not going to
[1:05] Speaker 1: default unless it renounces its ability to print you money.
[1:08] Speaker 1: There's a risk of inflation, there's no risk of default.
[1:11] Speaker 1: It is the safest loan you can make to anybody.
[1:16] Speaker 2: You can put your money in US bonds. You know
[1:18] Speaker 2: you will get it back, yes, And governments and investors
[1:21] Speaker 2: all over the world count on it for that exactly.
[1:24] Speaker 1: So this is as close to a risk free rate
[1:26] Speaker 1: as exists, and so it's written into spreadsheets across the
[1:30] Speaker 1: planet as the risk free rate, onto which you then
[1:33] Speaker 1: add more to take account of the extra risk that
[1:37] Speaker 1: goes with lending to Britain or Germany which is not
[1:40] Speaker 1: very much, or to Zambia or Mozambique, which would be
[1:45] Speaker 1: considerably more, and so on, or to companies. The higher
[1:49] Speaker 1: it goes, the higher the tougher financial conditions get for everyone.
[2:01] Speaker 2: This is the big take from Bloomberg News. I'm Stacey
[2:04] Speaker 2: Mannix Smith in for David Gura and Sarah Holder. Today
[2:07] Speaker 2: on the show, Bloomberg columnist John Authors joins us to
[2:10] Speaker 2: unpack a bond market roller coaster, a sell off, the
[2:14] Speaker 2: highest US thirty year bond yield since the financial crisis,
[2:18] Speaker 2: and a sudden intervention. Why is the US government jumping
[2:22] Speaker 2: in and what does this mean for the global economy.
[2:25] Speaker 2: We taped this on Wednesday morning at ten thirty Am Eastern. John,
[2:34] Speaker 2: you wrote on Monday that we have seen the yield
[2:36] Speaker 2: on the thirty year US Treasury go over five point
[2:39] Speaker 2: three percent, So that means basically the interest the US
[2:42] Speaker 2: is having to pay on these loans as a very
[2:45] Speaker 2: basic way of putting up at Still, that is the
[2:48] Speaker 2: highest it's been since two thousand and seven, which was
[2:50] Speaker 2: of course the eve of the global financial crisis.
[2:54] Speaker 1: And in many ways, that's spike up to five point
[2:56] Speaker 1: three percents, I would argue sparked the financial crisis.
[3:00] Speaker 2: And on Wednesday morning, the US treasure announced it would
[3:02] Speaker 2: increase buybacks of US bonds to help stabilize the bond market.
[3:07] Speaker 2: So is that why the US government is jumping in
[3:10] Speaker 2: here because we're sort of in financial crisis territory.
[3:13] Speaker 1: Certainly not in certainly not in O seven territory, but
[3:17] Speaker 1: in terms of are the same ultimate dynamics happening that
[3:22] Speaker 1: this could create issues, that this is something we don't
[3:26] Speaker 1: want to keep happening because it could begin to create
[3:28] Speaker 1: problems in the economy. Yes, one other issue that is
[3:33] Speaker 1: particularly troubling at the moment, which is an extremely positive
[3:40] Speaker 1: sign for the overall economy, but has its negative side
[3:44] Speaker 1: effects is all the investment in AI. So there are
[3:48] Speaker 1: all these massive new data centers being built, which some
[3:52] Speaker 1: people living nearby dislike. They cost a lot of money.
[3:56] Speaker 1: Generally speaking, even the very big companies with lots of
[3:59] Speaker 1: cash on the balance sheet that are building them are
[4:01] Speaker 1: borrowing to do so. This is very safe investments. To
[4:08] Speaker 1: lend to Apple or Amazon or whoever. To build an
[4:13] Speaker 1: enormous computer center for which there is demand is only
[4:17] Speaker 1: very slightly more risky than lending to Uncle Sam. It's
[4:21] Speaker 1: a very safe investment. There is a lot of borrowing
[4:25] Speaker 1: going on, and it's an appealing investment. And the way
[4:30] Speaker 1: that you counteract that if you're the government who also
[4:33] Speaker 1: needs to borrow, is you need to offer a higher yield,
[4:37] Speaker 1: which means you have to put up There is more competition,
[4:41] Speaker 1: and that competition basically forces you to reduce your price,
[4:46] Speaker 1: the price of the bond, which means, in the upside
[4:50] Speaker 1: down logic we all have to live within bond market
[4:53] Speaker 1: that the yield has to go up. And so you're
[4:58] Speaker 1: in a situation where the economy is strong and lots
[5:02] Speaker 1: of people are borrowing. In this case, you have a
[5:05] Speaker 1: very specific shock in the form of the capex required
[5:11] Speaker 1: to build out AI data center.
[5:12] Speaker 2: Capex is capital the money that you need, yeah.
[5:15] Speaker 1: Yeah, the big stuff, the one off, really big borrowing
[5:19] Speaker 1: you need to do to build the factory, which you
[5:22] Speaker 1: hope will pay for itself, and once you've built it,
[5:25] Speaker 1: you don't need to build another one. But this is
[5:28] Speaker 1: a period when lots of companies are doing very big
[5:32] Speaker 1: one off investments and borrowing to pay for them.
[5:35] Speaker 2: Okay.
[5:36] Speaker 1: That creates a further pressure upward on the yields that
[5:40] Speaker 1: the government.
[5:41] Speaker 2: Has to pay. Okay. So one of the reasons that
[5:43] Speaker 2: we're seeing the thirty year bond in such in this
[5:48] Speaker 2: territory is because there's competition.
[5:50] Speaker 1: Correct.
[5:51] Speaker 2: What are some of the other things that are pushing
[5:53] Speaker 2: up treasury yields that are making it more expensive for
[5:56] Speaker 2: the US government to brought money Other than the competition, I.
[5:59] Speaker 1: Think you have to look at the scale of the
[6:04] Speaker 1: fiscal deficit. It's again to be clear, nobody thinks that
[6:09] Speaker 1: the US would actually default, right. What could happen and
[6:14] Speaker 1: what historically does happen when the government has borrowed too
[6:18] Speaker 1: much is that most politically painless way, perhaps the most
[6:23] Speaker 1: humanly painless way to deal with it, is to inflate
[6:26] Speaker 1: away right.
[6:27] Speaker 2: To make the money worthless. It's like, why owe you
[6:29] Speaker 2: a one hundred dollars, But if I make that money
[6:32] Speaker 2: worth less, then I don't have to. I mean, I
[6:34] Speaker 2: can pay you one hundred dollars, but you can't buy
[6:36] Speaker 2: as much with it, which.
[6:37] Speaker 1: May well be a defensible least worst option. To be clear,
[6:41] Speaker 1: I'm not saying I like inflation, but I am saying
[6:43] Speaker 1: it's not a plainly bad thing. If politicians resort to that.
[6:48] Speaker 1: It's a bad thing if you're a bond investor, though,
[6:50] Speaker 1: because that eats away at the value of your coupon.
[6:53] Speaker 1: Your coupon has been fixed ten years in advance. I
[6:56] Speaker 1: will be getting ten dollars in ten years time. If
[7:00] Speaker 1: there has been ten percent inflation a year between now
[7:02] Speaker 1: and then, I am being paid far less.
[7:05] Speaker 2: And now my ten dollars can't even buy a coffee.
[7:08] Speaker 1: Yes, so I'm going to try to sell my bonds now,
[7:12] Speaker 1: which will cause more sellers than buyers. Price goes down.
[7:16] Speaker 1: Get so inflation risk borrowing, Yes, so, the risk of inflation,
[7:22] Speaker 1: the risk of debasement is always part of the concern.
[7:29] Speaker 1: The classic way to express your risk that governments are
[7:33] Speaker 1: just going to let inflation take off. Is with the gold.
[7:36] Speaker 2: Yeah, people would buy gold because they were like, well,
[7:38] Speaker 2: even if the money loses its value, gold will stay
[7:41] Speaker 2: had gold.
[7:42] Speaker 1: So we had an all time hypher gold earlier this year,
[7:45] Speaker 1: which has come back in but it's still at historically
[7:49] Speaker 1: very high levels. So there is definitely a concern about
[7:54] Speaker 1: let's call it debasement or another word you could use
[7:58] Speaker 1: for it is financial repair.
[8:00] Speaker 2: Okay, So reason number one is there's a lot of
[8:03] Speaker 2: competition for money. Yes, Reason number two is inflation. People
[8:08] Speaker 2: are worried about inflation and the debt that the US has.
[8:12] Speaker 2: Are there other reasons or are those the big two?
[8:15] Speaker 1: You could possibly subdivide inflation plus in other countries just
[8:23] Speaker 1: the fiscal overhang, and there does become somewhat more of
[8:26] Speaker 1: a risk of default.
[8:29] Speaker 2: What's fiscal overhang?
[8:31] Speaker 1: Sorry, where countries just have too much.
[8:33] Speaker 2: Debt, where the debt becomes overwhelming.
[8:34] Speaker 1: Yeah. If you look at Japan, I've run a few
[8:39] Speaker 1: charts on this. What has happened to Japanese bond yields
[8:42] Speaker 1: is quite extraordinary because we've had decades when Japan had
[8:46] Speaker 1: literally no inflation at all. That is no longer something
[8:49] Speaker 1: you can assume in Japan and bond yields have surged upwards.
[8:56] Speaker 1: And that's a problem because the overall debt in Japan
[8:59] Speaker 1: is something like twice GDP. It's far, it's high as
[9:03] Speaker 1: a proportion of the government than any other developed country.
[9:10] Speaker 1: Does that mean it's going to default? I doubt that
[9:14] Speaker 1: very much. Does it mean that something dramatic is going
[9:17] Speaker 1: to happen, which you may not want to be owning
[9:19] Speaker 1: Japanese bonds when it happens. Yes, that's plainly a risk,
[9:25] Speaker 1: and that would explain why people are getting getting out
[9:30] Speaker 1: of Japanese bonds and causing the yield to go up,
[9:32] Speaker 1: so that that would be The other one is classic.
[9:37] Speaker 1: The phrase I think we did a big take about
[9:39] Speaker 1: this a year or so ago is the notion of
[9:41] Speaker 1: bond vigilantes who simply don't believe that you are going
[9:46] Speaker 1: to be able to pay your debt and so start
[9:49] Speaker 1: putting pressure on you.
[9:50] Speaker 2: So what does that mean for people listening, like, how
[9:55] Speaker 2: do we see it for the non bond buyers of
[9:57] Speaker 2: the world, What does this mean or what might this
[10:00] Speaker 2: mean for us?
[10:02] Speaker 1: First of all, most of us don't consciously buy bonds,
[10:04] Speaker 1: but most of us do actually have quite a direct.
[10:07] Speaker 2: Expos secretly buying bonds.
[10:09] Speaker 1: Well, if you've got to four h one k, there's
[10:10] Speaker 1: some bonds in it. And if you've got a traditional pension,
[10:16] Speaker 1: your income in retirement is going to be dictated by
[10:18] Speaker 1: the bond market. And your mortgage rate, okay, it's fixed,
[10:25] Speaker 1: but the rate you the rate you obtained it at,
[10:29] Speaker 1: was determined by the bond market. And if you're thinking
[10:31] Speaker 1: of getting a new mortgage, you need to pay attention
[10:33] Speaker 1: to the bond market.
[10:34] Speaker 2: Business loan, if you're looking to expand your.
[10:36] Speaker 1: Business, ultimately will be tied to ultimately will be related
[10:41] Speaker 1: to this. Less the tenure, more the shorter term bonds,
[10:44] Speaker 1: but ultimately there are there are links throughout. Inherently, it's
[10:51] Speaker 1: not a bad thing when an economy is doing well,
[10:55] Speaker 1: which overall we know there are equality issues, but overall,
[10:59] Speaker 1: the usomy is doing well at the moment. Yes, yes,
[11:02] Speaker 1: very much, there's no question about that. Whether it's whether
[11:04] Speaker 1: it's fairly distributed is another matter all together. But in principle,
[11:09] Speaker 1: when growth is strong, bond yields rise a bit to
[11:14] Speaker 1: make sure people don't go overboard. That is actually a
[11:19] Speaker 1: good thing in principle, it's what it's a sort of.
[11:25] Speaker 1: It's one of the natural regulating mechanisms of capital markets.
[11:30] Speaker 1: What would worry me most about this is that it
[11:35] Speaker 1: could feed into greater issues with inequality when yields go
[11:42] Speaker 1: up when credit is tightened off. Broadly speaking, the people
[11:48] Speaker 1: who are least credit worthy will feel the effects first.
[11:53] Speaker 1: They will either this.
[11:54] Speaker 2: It gets more and more and more expensive for them
[11:56] Speaker 2: to borrow.
[11:57] Speaker 1: Money until they basically don't. All other things equal, higher
[12:02] Speaker 1: yields on bonds mean that bonds become more attractive compared
[12:08] Speaker 1: to stocks. They pay you a guarantee. Yield stocks you
[12:13] Speaker 1: have to take a risk. They probably pay you better,
[12:16] Speaker 1: but you're taking a risk. Right.
[12:17] Speaker 2: Stocks you make more money, but they're riskier. Bond you
[12:20] Speaker 2: make less money, but they're safe.
[12:21] Speaker 1: So, all other things equal, this should be bad for
[12:24] Speaker 1: the stock market yields. Yeah, it isn't having that effect
[12:30] Speaker 1: so far. At a certain point, higher yields can turn
[12:36] Speaker 1: into people exiting the stock market. That has been another
[12:41] Speaker 1: driver of inequality, and a lower stock market reduces inequality
[12:48] Speaker 1: in a bad way by making the richer people poorer
[12:51] Speaker 1: rather than making the poorer people richer.
[12:56] Speaker 2: So that is where things stand at the moment after
[12:59] Speaker 2: the break why the US Treasury announced an increase in
[13:02] Speaker 2: buybacks and how that could change the bond market math. So, John,
[13:17] Speaker 2: on Wednesday morning, the US Treasury announced it would be
[13:20] Speaker 2: buying back a bunch of bonds. What impact did that
[13:24] Speaker 2: announcement have?
[13:25] Speaker 1: The immediate effect, as we're recording this is that they've
[13:28] Speaker 1: managed to bring the yields down fairly sharply.
[13:31] Speaker 2: How does that help.
[13:32] Speaker 1: It's similar to when a company buys back its own stock. Okay,
[13:37] Speaker 1: you put up the value of them because other people are.
[13:41] Speaker 2: Is it like artificial competition a little bit?
[13:43] Speaker 1: Or yes? Sorry, I had a classical education. I was
[13:47] Speaker 1: going to say, it's like the Deis x machina. It's
[13:49] Speaker 1: like this this big gold figure that gets wielded into
[13:53] Speaker 1: a tragedy like this. It just comes in and there
[14:00] Speaker 1: is a new source of demand from somewhere and it
[14:05] Speaker 1: pushes the yields down. It costs the government money to
[14:08] Speaker 1: do this, but if it calms everything down in the
[14:13] Speaker 1: bond market in the medium term, as when people were
[14:17] Speaker 1: beginning to get nervous, it may make it cheaper than
[14:23] Speaker 1: next time it wants to raise debt because the yields
[14:26] Speaker 1: in the markets have come down. Also, let's again this.
[14:30] Speaker 1: We're not talking about a major disorderly crisis here. We're
[14:33] Speaker 1: talking about again bonds getting bond yields getting a little
[14:37] Speaker 1: too high for comfort, and the government responding by prodding
[14:43] Speaker 1: into the market, protruding, using some of its taxpayers' money
[14:47] Speaker 1: in the market to try to prod the market back
[14:49] Speaker 1: in another direction.
[14:50] Speaker 2: Okay. So, if we're nearing the end of our dinner
[14:54] Speaker 2: party and you keep referring back to these crises, which
[14:58] Speaker 2: is of course quite scary, but you've said several times
[15:03] Speaker 2: this is not that we're not in crisis yet. Why
[15:07] Speaker 2: is this moment different than two thousand and seven?
[15:10] Speaker 1: Okay? The main reasons this doesn't look like two thousand
[15:15] Speaker 1: and seven to me, The reasons I don't think this
[15:19] Speaker 1: is that bad subprime credit was enormous and was plainly overdone,
[15:28] Speaker 1: like lots of people.
[15:29] Speaker 2: A lot of bad debts, a lot of people.
[15:31] Speaker 1: Had received debt, had received loans who plainly shouldn't have
[15:35] Speaker 1: received them in the first place. Okay, And that debt
[15:41] Speaker 1: had then been repackaged and resold in such a way
[15:46] Speaker 1: that people weren't sure who exactly held it anymore. And
[15:52] Speaker 1: we eventually discovered that lots of banks in Europe had
[15:56] Speaker 1: bought the debt, and so that became a crisis of
[16:00] Speaker 1: Europe's sovereign debt. That crisis went on for years, and
[16:04] Speaker 1: this moment and at this moment, mortgage debt in this country.
[16:09] Speaker 1: The problem is almost the other way around, that people
[16:11] Speaker 1: can't get into the market, that house prices are such
[16:16] Speaker 1: and the rates at which people borrowed as such, that
[16:20] Speaker 1: the problem is almost the reverse, that it's too difficult
[16:22] Speaker 1: to get into the market in the first place. That's
[16:25] Speaker 1: a social problem, but it doesn't. But there is no
[16:28] Speaker 1: great risk that mortgages aren't going to pay off. Similarly,
[16:33] Speaker 1: we can complain bitterly about how a group of companies
[16:38] Speaker 1: are oligopolistic or monopolistic and are hoovering up all the
[16:43] Speaker 1: money and are charging too much and making too much profit.
[16:48] Speaker 1: All of those those are valid criticisms and complaints. They're
[16:54] Speaker 1: good for their.
[16:55] Speaker 2: Debt, right, they can pay their bills.
[16:58] Speaker 1: Yes, if Amazon naggs on its debts, that is that
[17:02] Speaker 1: is a very shocking thing. It's far less likely than
[17:07] Speaker 1: the number of people who had borrowed mortgages, borrowed and
[17:11] Speaker 1: bought houses with ninja loans. I don't know if people
[17:14] Speaker 1: remember that no income, no job. Oh yes, there isn't.
[17:18] Speaker 1: There isn't a contemporary equivalent of that. If there are
[17:22] Speaker 1: losses to be taken, broadly speaking, they will be taken
[17:25] Speaker 1: by people who have the broad shoulders to take them,
[17:28] Speaker 1: such as the very big companies that we're all complaining about.
[17:33] Speaker 1: I said at the outset, the tenure yield is the
[17:36] Speaker 1: most important number in global finance. It has to be respected.
[17:41] Speaker 1: You could argue that a raising yield heads off problems
[17:45] Speaker 1: before they get too serious if people are listening to it.
[17:49] Speaker 1: It's part of the balancing mechanism the canary.
[17:52] Speaker 2: Like the canary and the fore line for the economy.
[17:55] Speaker 1: What we are seeing here is more of a frog
[17:57] Speaker 1: being boiled slowly. That doesn't lead to a crisis. It
[18:02] Speaker 1: does lead to the kind of dynamics that we've been discussing.
[18:07] Speaker 1: And if nobody pays attention, and I guess Scott Besant's
[18:12] Speaker 1: showing that he's watching by intervening to try to get
[18:14] Speaker 1: the yield down shows that people are paying attention. If
[18:17] Speaker 1: nobody pays attention, there is the risk of something disorderly
[18:22] Speaker 1: finally happening of the bond market just saying okay, we're tipping,
[18:26] Speaker 1: we're getting out or mass, and that can lead to
[18:29] Speaker 1: something scary. But it's almost the speed of the rise
[18:33] Speaker 1: in the yields, the speed with which they lose confidence,
[18:37] Speaker 1: that would be the problem more than the rate itself.
[18:41] Speaker 1: That is the alarm. And that is why Scott Besant
[18:44] Speaker 1: is trying to calm that market. Whether he is then
[18:49] Speaker 1: able to deal with the longer term concern, which is
[18:53] Speaker 1: convince everybody that the US has debts that it can
[18:57] Speaker 1: finance without just allowing inflation to take off, that is
[19:01] Speaker 1: a much deeper, longer term concern.
[19:03] Speaker 2: Well, John, thank you so much for coming and talking
[19:06] Speaker 2: bonds with us.
[19:08] Speaker 1: Thank you, and don't ever go to a dinner party
[19:12] Speaker 1: with me.
[19:15] Speaker 2: This is the Big Take from Bloomberg News. I'm Stacey
[19:17] Speaker 2: Vannick Smith in for Sarah Holder and David Gura. To
[19:20] Speaker 2: get more from The Big Take and unlimited access to
[19:23] Speaker 2: all of Bloomberg dot com, subscribe today at Bloomberg dot
[19:27] Speaker 2: com slash podcast offer. If you liked this episode, make
[19:31] Speaker 2: sure to follow and review The Big Take wherever you
[19:33] Speaker 2: listen to podcasts. Helps people find the show, and thank
[19:36] Speaker 2: you for listening. We'll see you tomorrow,

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