# Bond yields are returning to normal **URL:** \ **Category:** Macro Economic Trends and Risks\ **Created:** [August 19, 2026, 2:31pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047 "2026-08-19T14:31:52Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![WendyBG](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/wendybg/32/67464_2.png) [@WendyBG](https://discussion.fool.com/u/WendyBG)\ **Post date:** [August 19, 2026, 2:31pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/1 "2026-08-19T14:31:52Z")
I have spent many hours and read books about the history of the modern financial system, which is heavily reliant on debt. Where there is debt there will be interest rates. The price of a bond, like any asset, depends on supply and demand. If lenders don’t think that the risk-reward balance is adequate they will hold out for higher interest rates. The price of a bond moves opposite to its yield so rising interest rates force bond prices to fall, which some writers call a “bond rout” since all previous bonds will drop in value. The book, “The Price of Time,” by Edward Chancellor describes interest rates since the inception of modern economies. He quotes Walter Bagehot’s 19th century aphorism, “John Bull can stand many things but he cannot stand two per cent,” to illustrate that 2% is an unacceptable yield. England had a large, active financial market long before the U.S. Low bond yields drove investors into “TINA” stock bubbles. > **[John Bull and Two Percent](https://www.mauldineconomics.com/frontlinethoughts/john-bull-and-two-percent)** > > The economics profession has long had a vigorous academic argument over “natural” interest rates. What would rates be if we could somehow remove all the subjective actors—central banks, commercial lenders, government agencies—that conspire to set... While the stock market tends to focus on the overnight fed funds rate, the 10 year Treasury yield is far more important since many long-term loans are based on it. But the yield that matters to lenders is the REAL yield, which is the yield after inflation takes its bite. > **[Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted...](https://fred.stlouisfed.org/series/DGS10)** > > Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis > **[10-Year Real Interest Rate](https://fred.stlouisfed.org/series/REAINTRATREARAT10Y)** > > 10-Year Real Interest Rate The Federal Reserve deliberately suppressed long-term Treasury real yields after 2007 to below 2% using the vast fiat money tsunami called “QE.” At times, the real 10 year yield was under zero, where lenders were paying borrowers to borrow money. Ridiculous! > **[Assets: Total Assets: Total Assets (Less Eliminations from Consolidation):...](https://fred.stlouisfed.org/series/WALCL)** > > Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level Since 2022, when the Fed stopped QE and began to slowly, slowly let their bonds mature without replacing them, the 10 year real yield has bounced in a stable channel just below 2%. Since June 2026, the 10 YT real yield has crept above 2%. That should be the _minimum_ real yield but bond traders are freaking out because all their existing bonds - $Trillions - are dropping in value. [https://www.wsj.com/opinion/bond-market-interest-rates-investing-economy-59c092c1?mod=hp\_opin\_pos\_3](https://www.wsj.com/opinion/bond-market-interest-rates-investing-economy-59c092c1?mod=hp_opin_pos_3) # High Anxiety in the Bond Market ## A return to pre-2008 interest rates isn’t cause for financial panic. * * * By [The Editorial Board](https://www.wsj.com/news/author/editorial-board), The Wall Street Journal, Aug. 18, 2026 Apparently “rout” is the new word for [interest rates](https://www.wsj.com/topics/subject/interest-rates) returning to a historical norm. That’s one impression from the freakout now attending a repricing in global bond markets that’s resetting the global financial system to its pre-2008 level… In other words, yields finally are reverting to normal after the low-rate era following the 2008 financial panic and European sovereign crisis. … While it sounds frightening to say rates are higher than they’ve been in nearly 20 years, the past two decades are the era that was abnormal. The U.S. economy has survived—thrived, actually—during periods of higher interest rates. The return of normality augurs well for the productive allocation of capital, which is good for growth and job creation…[end quote] The TIPS yield has been rising along with the Treasury yield, which shows that the rise in the Treasury isn’t due to concerns about inflation (since the TIPS is inflation-adjusted). The rising yields are due to supply-demand balance in the bond market. The market is expecting supply of bonds (increase of borrowing) to rise faster than the amount lenders are willing to buy. > **[Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted...](https://fred.stlouisfed.org/series/DFII10)** > > Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis, Inflation-Indexed Now that bond yields are finally rising, all debtors will be pinched by higher interest rates. Normally the Fed controls interest rates but now Treasury is actually buying back bonds to suppress yields. [https://www.wsj.com/livecoverage/stock-market-today-dow-sp-500-nasdaq-08-19-2026?mod=hp\_lead\_pos2](https://www.wsj.com/livecoverage/stock-market-today-dow-sp-500-nasdaq-08-19-2026?mod=hp_lead_pos2) # Stock Market Today: Bond Yields Dive After Bessent Steps Up Buybacks ## Treasury says it doesn’t intend to ‘mitigate episodes of acute market stress’ U.S. government bond yields are sliding after the Treasury Department said it would at least double the amount of bonds it buys back. The move comes after the 30-year U.S. Treasury yield hit its highest level in 19 years earlier this week, amid [investor anxieties](https://www.wsj.com/finance/investing/bonds-are-getting-hammered-and-wall-street-says-the-rout-wont-end-anytime-soon-895e0ad8) over fiscal deficits, heavy AI borrowing and inflation that pushed up borrowing costs around the world… [end quote] How can Treasury, which is deeply in debt, buy back bonds? Treasury issues bonds that are in demand (short-term bonds) in order to buy less-liquid long-term bonds, especially older ones that aren’t in demand. That increases the overall federal debt but it suppresses the yield of the longer-term bonds. That’s called “yield curve smoothing” since the yield curve has been changing much more at the long durations than the short durations. > **[Dynamic Yield Curve | StockCharts.com](https://stockcharts.com/freecharts/yieldcurve.php)** > > Visualize the relationship between interest rates and stocks over time using our draggable, interactive yield curve charting tool. Treasury can do this indefinitely but there’s a limit. The Treasury Borrowing Advisory Committee (TBAC) historically recommends that short-term Treasury Bills make up 15% to 20% of total outstanding debt. Treasury yields have a huge impact on the federal debt. Also on companies that need to borrow for new projects (AI, etc.) and/ or to refinance existing debt which is maturing. Wendy ---
**Author:** ![iampops5](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/iampops5/32/1543_2.png) [@iampops5](https://discussion.fool.com/u/iampops5)\ **Post date:** [August 19, 2026, 2:35pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/2 "2026-08-19T14:35:20Z")
I hope you solve the riddle. As far as I can see our economy is now built upon infinite debt. ---
**Author:** ![captainccs](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/captainccs/32/3775_2.png) [@captainccs](https://discussion.fool.com/u/captainccs)\ **Post date:** [August 19, 2026, 7:33pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/3 "2026-08-19T19:33:31Z")
There is good debt and there is bad debt. **Good Debt** Suppose someone makes a fortune and just stashes away the money like Uncle Scrooge. ![Unclr_Scrooge](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/3/d/3dccfef958fe1e3d54b8be27419d4ea9ff36cce9.webp) That money is not doing anything useful for the economy, for the people who make up that economy. If Uncle Scrooge lends that money to some successful enterprising fellow that money, that debt, adds to the economy. **Bad Debt** If Uncle Sam prints money ![Uncle_Sam](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/8/d/8d176a9f3365f88af9ff403531c72e00f032c8df.jpeg) because the country is spending above its means, that is bad debt that in the long run will collapse the economy because there is no Uncle Scrooge protecting this money. It’s free Manna from Heaven. There is more where it came from, just run the printing press. ![Manna from Heaven](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/9/8/98f9bcd147a94f3420b7f151ae03bdf2d3075ffa.jpeg) The Romans did it, Panem et Circenses! ![Panem et Circenses](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/f/6/f6207ed28b99afd4592eb0bbc2e5db54ff2b1637.jpeg) Ever heard of inflation? ![balloon](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/f/d/fdaa3cbc54a4b321d4101bd880f60ee0d66dcdbc.jpeg) It’s just more money being minted than wealth being created. The Captain ---
**Author:** ![intercst](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/intercst/32/1543_2.png) [@intercst](https://discussion.fool.com/u/intercst)\ **Post date:** [August 19, 2026, 7:41pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/4 "2026-08-19T19:41:51Z")
> [@captainccs](#): > > If Uncle Sam prints money It depends on what Uncle Sam is spending the money on. If we’re buying infrastructure or making people healthier, that’s good debt. If we’re spending it on another expensive and embarrassing misadventure in the MIddle East, that’s very bad debt. intercst ---
**Author:** ![DrBob2](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/drbob2/32/3456_2.png) [@DrBob2](https://discussion.fool.com/u/DrBob2)\ **Post date:** [August 19, 2026, 9:14pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/5 "2026-08-19T21:14:47Z")
> [@captainccs](#): > > Suppose someone makes a fortune and just stashes away the money like Uncle Scrooge. It’s not like they put the dollars under their mattress. The fortune has to go somewhere – a bank account, equities, hedge funds, real estate, collectibles, etc. DB2 ---
**Author:** ![Goofyhoofy](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/goofyhoofy/32/4721_2.png) [@Goofyhoofy](https://discussion.fool.com/u/Goofyhoofy)\ **Post date:** [August 19, 2026, 9:54pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/6 "2026-08-19T21:54:50Z")
[quote=“captainccs, post:3, topic:126047”] because the country is spending above its means, that is bad debt that in the long run will collapse the econom because there is no Uncle Scrooge protecting this money [/quote] c c b By this theory the Panama Canal was bad. Also lots of railroads. Also NASA. And university basic research. And … Did you know Google came out of a National Science Foundation project? And the internet from ARPANET? Also vaccines, MRI technology and Crispr gene editing from government funded research? Also bar codes and doppler radar. Also jet engines. Microchips. So much of our modern world is thanks to government spending, or as I prefer to call it “investment.” I look at China which has bolted from nowhere to #2 in a single generation. Of course the haven’t twiddled away TRILLIONS in pointless wars while we have been in what, a half dozen of them. All govt spending is not the same. ---
**Author:** ![captainccs](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/captainccs/32/3775_2.png) [@captainccs](https://discussion.fool.com/u/captainccs)\ **Post date:** [August 20, 2026, 10:49am UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/7 "2026-08-20T10:49:23Z")
> [@Goofyhoofy](#): > > By this theory the Panama Canal was bad. Also lots of railroads. Also NASA. And university basic research. And … The kids at school were planning a Summer trip to Europe. I told my dad about it and that I would like to go. - Dad: “Go ahead!” - Me: "I don’t have the money.’ - Dad: “With money anyone can do it.” Years later after I got a job at IBM - Me: “I’d like to buy a car.” - Dad: “Go ahead.” - Me: "I don’t yet have the money.’ - Dad: “With money anyone can do it.” The issue is not good or bad but can you afford them. The Captain ---
**Author:** ![tjscott0](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/tjscott0/32/1083_2.png) [@tjscott0](https://discussion.fool.com/u/tjscott0)\ **Post date:** [August 20, 2026, 1:47pm UTC](https://discussion.fool.com/t/bond-yields-are-returning-to-normal/126047/8 "2026-08-20T13:47:56Z")
> [@captainccs](#): > > The kids at school were planning a Summer trip to Europe. I told my dad about it and that I would like to go. > > - Dad: “Go ahead!” > - Me: "I don’t have the money.’ > - Dad: “With money anyone can do it.” > > Years later after I got a job at IBM > > - Me: “I’d like to buy a car.” > - Dad: “Go ahead.” > - Me: "I don’t yet have the money.’ > - Dad: “With money anyone can do it.” Your Dad & mine must have been separated at birth. 😉 The summer of 1963 [I was 12 1/2 years old] pappy sat me down for a conversation. The gist of the one way conversation.🙂 Pappy:_“It sucks not having money. Don’t it. I see a lot of kids your age working at the library & grocery stores & starting their own businesses mowing lawns. There ain’t anything holding you back from acquiring money! Have at it!”_