Economics expert Greg Ip analyzes causes and effects of rising bond yields
Yields on Treasury bonds rose sharply this week, with the 30-year note climbing over 5%, the highest level in 19 years, according to an NPR interview with Greg Ip, chief economics commentator at The Wall Street Journal. Ip identified three common drivers across countries seeing similar rises: persistent inflation after COVID, large and growing government deficits, and a political culture tilted toward populism that lacks will to make difficult decisions to reduce deficits. For the U.S. government, higher yields make borrowing more expensive to finance deficit spending, and for consumers, they could translate into higher mortgage rates. Ip noted that government debt in the U.S. is now over 100% of GDP, virtually without precedent in the postwar era. He said the Federal Reserve will have difficulty justifying lowering short-term rates, and warned that higher borrowing costs could hurt the economy and stock market. Ip added that the rise in bond yields in the U.S. is mirrored in Japan and the U.K., where yields on government bonds reached record and 28-year highs, respectively. He emphasized that central bank credibility, particularly under new Federal Reserve Chairman Kevin Warsh, is key to returning to low and stable inflation.
What’s reported
The 30-year Treasury note yield rose over 5%, the highest level in 19 years.
For the government, higher yields mean borrowing to finance deficit spending becomes more expensive.
For consumers, higher yields could mean higher mortgage rates.
Yields on government bonds in Japan reached their highest level ever; in the U.K., they reached a 28-year high.
Ip cited three common drivers: inflation, large government deficits, and populist political culture with no will to reduce deficits.
U.S. government debt is now over 100% of GDP, virtually without precedent in the postwar era.
The war against Iran and closure of the Strait of Hormuz contributed to a new dose of inflation through rising energy prices.
President Trump has talked about suspending the federal gasoline tax, and Japan has proposed borrowing more to protect households from energy costs.
Markets price inflation to return to 2% after two or three years, according to Ip.
Kevin Warsh has just assumed the chairmanship of the Federal Reserve.
Key figures
Greg Ip: chief economics commentator at The Wall Street Journal
Scott Simon: NPR host
Kevin Warsh: new Federal Reserve chairman
Sources: NPR
