Treasuries are priced alongside term SOFR at one year [1][2]. The cost to insure U.S. debt is in line with where it's been for the last five years [3]. (And around where they were ten years ago.)
This has nothing to do with investors' perceptions of U.S. credit and everything to do with the financial rates environment.
earlier this year the fed quietly ended QT and began "reserve management" so they're buying the front end and letting the long end do its thing.
then in steps kevin warsh... historical backdrop: warsh resigned from the fed in 2011 because the fed owned too many assets. since then the fed bought 4 trillion more more than doubling the size of the fed balance sheet
warsh wants to shrink the balance sheet. only way to do that is to buy less treasuries, but the only reason 30 year mortgage isn't >15% is because the fed is the biggest buyer of long dated treasuries and mortgage backed securities (as in MBS i.e. the paper not the prince) since 2009...
so if warsh gets what he wants the long end is guaranteed to spike
then you add in the executive branch trying to to re-engineer the current account balance w the mar-a-lago accord and the correct reaction is not "wow rates are high" its "wow its kind of amazing rates are as low as they are in the long end", especially with the private markets gulping down as much gpu collateralized debt as it can without dislocating a jaw...
> This has nothing to do with investors' perceptions of U.S. credit and everything to do with the financial rates environment
It absolutely is related to investors' perceptions of U.S. credit worthiness. The news is about the 13th of August 2026 auction.
Entities lending money to US want increasingly higher compensation, which is unsurprising considering that the US projected deficits are ballooning (an estimated 7.4% both in 2026 and 27). US has already blown past 1.8T in deficit in the first 6 months of 2026 alone. That's higher than the deficit for the entirety of 2025.
Finding money to absorb all this spending is not easy and lenders are spooked by inflation and borrowing levels.
> It absolutely is related to investors' perceptions of U.S. credit
Related to, not evidence of. I added a CDS reference which isolates the credit component.
> Entities lending money to US want increasingly higher compensation
Entities lending money in dollars want higher compensation. There is no evidence they demand a risk premium from the United States.
What we are seeing is an increasing term premium. But that doesn't have to do with the U.S.'s perceived creditworthiness, it's a function of money supply and demand.
> Several factors have driven the rise in bond yields, including higher inflation expectations amid elevated energy prices following the Iran war and uncertainty surrounding a new Federal Reserve Chair. But the more fundamental concern is the US fiscal position: persistently high budget deficits have reached 6 percent of GDP, while government debt now exceeds the size of the US economy.
> In Fiscal Year 2026, which ends in September, the US Treasury is expected to issue around $2 trillion of securities on a net basis. Gross issuance, meanwhile, could reach a staggering $20 trillion according to the Securities Industry and Financial Markets Association. That gap reflects the sheer volume of debt that needs to be rolled over, much of it resulting from the Treasury’s decision under former Secretary Janet Yellen to favor shorter maturities when rates were lower and curves were upward sloping.
> US Treasury Secretary Scott Bessent has been attentive to the resulting borrowing costs and their impact on the budget deficit, which is why the Treasury has sought to limit pressure on the US bond market from foreign central banks that need dollars. During a recent joint FX market intervention with Japan, the Treasury sold euros for yen rather than dollars, avoiding transactions that would have required selling Treasuries. It has also asked the Fed to raise the limit on its Foreign and International Monetary Authorities repo facility, allowing the Bank of Japan and other foreign central banks to borrow short-term dollars against Treasuries rather than sell them in the open market, which could put further upward pressure on yields.
> “Investors are being asked to absorb a growing supply of government debt globally at a time when deficits remain large, inflation uncertainty persists” and the Federal Reserve is no longer a major buyer, said Michal Stanczyk, portfolio manager for the global fixed income team at Allspring Global Investments.
> “If investors continue demanding greater compensation for inflation and fiscal risks, long-term yields could move higher and away from 5% even if Treasury auctions remain well covered,” he said.
We can reasonably debate if investors should treat the U.S. as a riskier credit. But these auctions, CDS data and other funding rates for high-quality non-U.S. dollar-denominated credits (e.g. Saudi Arabia's dollar-denominated debt [2]) do not show what the article implies they do.
Forgive me if I defer to the bond market and treasury auction data. The data shows a path to a potential debt spiral and crisis based on yields demanded and debt outstanding. Current annual debt servicing expense is already ~$1T/year.
> Then the treasury fills these orders from the lowest to highest bid
No, it does not. Treasury goes down the list until it has allocated the auction and then everyone gets the marginal rate. (And that's for competitive bids. You can also submit a non-competitive bid with no price–that gets filled first.)
> US paying the highest rates in 25 years means the buyers are expecting higher premiums
Would recommend looking up credit versus rates. It’s a useful construct.
> they ask them because they are worried about inflation
Nope. Do you know what TIPS are? You can compare the price of a normal Treasury and a TIP to get what Treasury buyers think about inflation. That's the breakeven-inflation rate in my top comment.
If you say you think they're wrong, I think I might agree. But the data–Treasury auction and insurance data–speak unambiguously to these points of investors' views, specicially, creditworthineness and inflation expectation.
What's really interesting is where exactly the debt is going.
If the US were funneling money into long-term programs designed to improve the country and its residents' lives and/or earn some return on investment, that would be one thing.
Instead, it seems focused on continually increasing military spending (to little effect - see: Straight of Hormuz) and reducing the proportion of the tax revenues coming from its wealthiest individuals while taking a chainsaw to programs helping the poorest without any significant savings to show for it.
You couldn't do a worse job if you were following step-by-step instructions by an adversary for sabotaging the country from within.
It’s going to paying for an aging demographic and medical care. The same as literally every western country. Which is why I don’t view this as a particularly American issue.
America is doing a bad job of addressing this, but it also has more leeway.
Because the US does not control other countries fiscal policy which is where government debt rates come from. Germany and the UK have entirely different ways to determine fiscal and currency policy from each other, not to mention from the US.
If there is correlation between those things it’s either by choice (the German people tieing their government to the US) or it’s demographic.
"The secretary of state effectively controls Venezuela’s finances, the distribution of its natural resources and its government. His grip on the country is a vivid manifestation of American power in the Trump era."
This is but one of many examples of the broad reach of American control over other countries' policies.
> Blinder and Watson reported that budget deficits tended to be smaller under Democrats at 2.1% potential GDP versus 2.8% potential GDP for Republicans, a difference of about 0.7 of a percentage point. They wrote that higher budget deficits should theoretically have boosted the economy more for Republicans, and therefore cannot explain the greater GDP growth under Democrats.[3] Since 1981, federal budget deficits have increased under Republican presidents Ronald Reagan, both Bushes, and Trump, while deficits have declined under Democratic presidents Clinton and Obama. The federal government ran surpluses during Clinton's last four fiscal years, the first surpluses since 1969. The deficit was projected to decline sharply in Biden's first fiscal year.
The last pre-GFC Bush II year of 2007 had a federal budget deficit of $163B. The budget deficit in 2016, Obama’s last year, was $587B.
The last pre-Covid Trump I year of 2019 had a $984B deficit. After Covid, Biden’s final full year deficit was $1.83T.
There’s a non-zero correlation between any number of policy choices by both parties and the GFC or Covid, but it’s hard to see these primarily as anything but exogenous shocks.
Sure, if you exclude the big increases, you can draw different conclusions.
GFC was not an exogenous shock, and even if it was, a) Bush was in office setting policy the prior 6 years and b) the specific response was not preordained (for ex: it is not part of the Constitution that rich people must pay lower tax rates than they did in 1982, that invariant is a policy choice).
> b) the specific response was not preordained (for ex: it is not part of the Constitution that rich people must pay lower tax rates than they did in 1982, that invariant is a policy choice).
We did not have to blow up the deficit (as badly) as a result of the GFC. That was a specific set of policy choices that the Bush team made, in part to preserve the capital gains tax cuts and low corporate tax rates. (If a corporation is a person for some purposes under the law and can claim some personhood rights, why are they not subject to the person's tax code?)
It is also a policy choice to tax capital gains, chiefly for very rich people, at a lower marginal rate than income earned through other means. It is not in the Constitution that our tax policy must favor the very rich.
One could imagine a world in which the response was along the lines that "this is a once-in-a-century crisis, so rich people and corporations will have to make the sacrifice of paying GOP Reagan 1981 tax rates for a few years to help us build a stronger foundation for the future."
Notably, CBO did expect (at the time) the Bush budget to increase the federal debt by roughly a third over a decade. It was well known and discussed at the time that the Bush budget would inflate our debt burden.
> pushed the deficit to a low % of GDP we’d kill for right now
Empirically, we would not. We are allowed to choose the entire composition of the House every two years, a third of the Senate is up for reelection with the same frequency, and the White House every four years. In no election of the last half-century or so has fiscal prudence been a major issue. If we would "kill" to lower the budget deficit, the easy first step would be to not re-elect the president who presided over the largest increase in the deficit in our history (by percentage: W Bush; by $: Trump).
As much as one might wish it were otherwise, voters simply do not care.
This is what I meant by stories you could tell. Other folks blame Glass-Steagall repeal, which happened during the Clinton administration. The Big Short blamed it on the invention of the MBS a couple decades earlier.
IAE, nobody thinks it was a mistake to make a massive fiscal investment in 2008 to avert a depression, as you say. It’s hard to say that is a meaningful signal about the budgetary prudence of the GOP vs. Democrats.
Similarly, if Covid had hit in 2016, it wouldn’t have discredited Obama’s budgetary acumen if he spent a trillion on backstopping the economy against it.
Imagine if all this capital investment in AI were instead being focused on solar build out. The vibes would be much more positive, but the return on capital for solar panels frankly looks paltry compared to what LLM tokens by the quadrillions can do.
Congress sets the budgets (well, is supposed to, but yes there has been pretty excessive delegation to the executive) so you really want to say every Congress # + White House.
When you break it up that way, there have been several fiscally conservative congresses + good presidency combos, most notably under Clinton where they reformed welfare, increased taxes and managed to get a budget surplus one year. The formula seems to be slim Democratic Party majorities in Congress with a Democrat president.
So yes it’s rare but good governance + rising tides can make a difference.
Did the British Empire collapse during the Suez Crisis of 1956, when it was embarassingly unable to open a major shipping chokepoint via military force?
Did we know it had by 1957, or did that take a little longer to confirm the shape of the decline?
In retrospect the inability of the empire to hold Singapore against the Japanese in WW2 and leave Australia in the hands of the US was the unraveling of the British empire. The Dutch one as well with the fall of the Dutch East Indies.
Didn't we rather embarrasingly withdraw from Afghanistan recently after two decades of trying to build a functioning government, only to have the Taliban take it back in a matter of days?
You're kinda making the point I'm making; the sound of an empire collapsing is often a long rumble, not a sudden snap.
If your suggestion is that the US might be in decline and there have been lots of signals of that going back 30 years, I’m pretty sympathetic. But if it’s specifically the Iran war fiasco compared to the Suez incident I’d suggest those aren’t particularly the same.
Did the US lose control of the most populous part of its “empire” in the last 20 years? Did it get its population and infrastructure destroyed across 2 generations in world wars in the last 50?
Has the US just come off of required rationing for basic food stuffs and been running in 20 years of austerity?
Or is the US still the dominant economy in the world, with a problem of over abundance of staples and stuff?
The idea that late 1950s uk and the 2026 us are equivalent is laughable.
> Did the US lose control of the most populous part of its “empire” in the last 20 years?
I might count alienating NATO and China's growing independence as uncomfortably close to that, yes.
> Has the US just come off of required rationing for basic food stuffs and been running in 20 years of austerity?
Doesn't that make our inability to effectively project power more embarassing? We don't even have to scrap our warships to fund operations; we're dismantling our global soft power sources willingly.
> Or is the US still the dominant economy in the world, with a problem of over abundance of staples and stuff?
By the time of the Suez incident the uk hadn’t been the dominant global economy for going on 70 years. The second Boer war is probably a better example of shocking poor outcome for their empire by that timeline.
Queen Victoria was still alive at that point and ww1 was in the future. Even after ww1 when it was obvious the empire was severely diminished the English retained outsized soft power at least and had until the 60s for the empire to be truly dismantled.
Kinda, yes. Osama Bin Laden's express goal was to bankrupt the U.S. by provoking it into a war it could not win. Three wars in the Middle East later, and $33T in additional government debt, and hear we are.
9/11 was arguably the most effective asymmetric attack in the annals of military history, in terms of simple weapon effect.
At the same time, it spells out the limits of seeing the world in terms of weapon effect: an American population brutalized by twenty years of occupation; Israel binding tight alliance with Saud; a resurgent heretic Shia power; a meteoric rise of China - historically far more of a foe to Islam than the West. None of these are what you might call brilliant for Bin Laden's ultimate goals.
When we fire a gun we don't know what that bullet does twenty years from now.
9/11 eroded American democracy in ways that wouldn’t be considered possible. What we observe now is just one more chapter of a long fall that has started in the mid 1980s. Increasing income inequality, breeding dissatisfaction to the point a former reality show character gets elected president.
This all was done by many hands - Putin being an obvious one also destabilising the European Union and NATO, and China acquiring the manufacturing prowess the US decided wasn’t worth the effort anymore, and so on. Add to that what seems to be the last straw, a unified payment system that doesn’t uses the dollar as its currency, and you have the perfect storm.
Was it Stalin who said the capitalist will gladly sell you the rope you’ll use to hang them?
"What fool will sell us his secrets?" is what Stalin is said to have replied when Khrunichev (aviation minister) and Yakovlev proposed buying British engines in 1946 for their Mig design, which (with British Nene engines) would become the best-in-theatre Mig-15. As with most Stalin quotes the attribution is pretty weak, but we do have multiple sources.
The rope line is Lenin's, supposedly. The earliest verified appearance is October 31, 1955, in The Commonwealth, journal of the Commonwealth Club of California, where Major George Racey Jordan attributed to Lenin:
"When it comes time to hang the capitalists, they will vie with each other for the rope contract.
Now, Lenin died in 1924. So the closest match near as anyone can tell is a note in Annenkov's memoir, published in Novyi Zhurnal 1961: capitalists would supply credits and technical equipment that would restore Soviet military industry for future attacks on those same suppliers
"they will work on the preparation of their own suicide."
What is happening with 21st century America is also extension of the larger narrative of the end of the european era, which, if you put that exact phrase in Title Case, was the actual verbatim title of my main intro European history textbook, as a freshman undergrad . . in the 1990s. So that's a thing.
Today we are in the middle of history, no doubt about that: the transition of global hegemon[0] for the first time in the nuclear age. That's a ticklish proposition at the best of times, and it would have been lovely if the leadership class had stepped up. Unfortunately, well . . . where we are now, it's going to often be China's leadership steering humanity around the thermonuclear bonfire[1].
Let's call the whole thing the end of the western era, a phrase which makes me sound like a Nazi, but apparently if there is one thing everything can agree on it's that the age of the west is ending.
Now, the difference between me and a Nazi is that I interpret "Age of the West", as, "humanity has been `the west` and then there are other guys", and that the end means that age is over. If I were a Nazi, I interpret "End of the West" as literally existential, which would make me - surprise! - escalate my actions and rhetoric. A huge part of the art of reactionary and revolutionary movements across history is removing any idea of an alternative, of a compromise benefitting all. And in the current era, it is so dangerously easy to add and remove ideas from the populace.
[0] Which, I want to state openly, was not written in the stars. As late as 9/11, America could have made the 21st century the American century, but, well, we decided to go play in the sandbox instead. Now, why we did that, that will become an area of future study for centuries.
[1] A fact that they are quite aware of, as they watch the American situation. "Why don't they crush Taiwan like a ripe fruit?" - because PRC don't have confidence that American leadership won't jump right to the top of the escalation ladder if a CVBG is mission killed. So they wait.
Entire global society collapse is probably less than 25 years away due to climate change spiraling out of control. Relative to that the US national debt hardly even matters.
If only it could get fucked in isolation like that country. It's basically Rome and the whole planet is its empire, whatever happens the shockwaves affect everyone on the planet.
This has nothing to do with investors' perceptions of U.S. credit and everything to do with the financial rates environment.
[1] https://home.treasury.gov/resource-center/data-chart-center/...
[2] https://www.global-rates.com/en/interest-rates/cme-term-sofr...
[3] https://en.macromicro.me/charts/68239/us-5year-cds