Global bond yields hit 2008 highs, raising stakes for big borrowers
reuters.com163 points by kaycebasques a day ago
163 points by kaycebasques a day ago
Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds:
Couldn't be bothered to read the article before commenting?
> James Bilson, global fixed income strategist at Schroders, said fiscal policy and debt sustainability are crucial for bond markets and the current rise in U.S. yields is not yet a sign of increasing sovereign credit risk.
> The cost of insuring U.S. sovereign debt against the risk of default, as reflected by credit default swaps, has fallen to its lowest since February, for example.
> "Combined policy is too loose to deliver sustained 2% inflation," he said. "This, in one line, is the root cause of the current weakness in bonds. Solve inflation, and many other problems become much easier too."
Rates also encode inflation expectations. So it may be that inflation is expected higher in the US
> Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds
That's not what rates indicate. its one component, but its far from a straight line from higher rates to more risk.
You can't really compare bonds that pay in different currencies by Rate alone.
Why not? Percentage is the same for dollars as it is for yen or franks or pesos
Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers.
Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.
> Why not? Percentage is the same for dollars as it is for yen or franks or pesos
That's a fair question if you aren't int he industry. Inflation would be the best example of why you can't do that.
Would you rather have a Zimbabwe bond that pays 10%(when they had 10,000% inflation a year) or a US bond that pays 5%
Sort of. You also have to consider exchange rate futures, the value of the currency you will be getting paid in may change dramatically.
Is the euro doing or expected to do something strange?
Not sure, not my domain. My comment was just highlighting that comparing the yields on two sovereign bonds with the same maturity doesn’t necessarily mean one is riskier than the other, there are other factors.
The main complaint from Greece and Italy has been that Germany (and maybe even France) demanded (and got) strong monetary discipline for the Euro, so I'm pretty sure that the Euro itself isn't going to affect their debt much.
Hopefully I'm looking at the right thing, but it looks like market expections are that you will get more USD per EUR in the future: https://www.cmegroup.com/markets/fx/g10/euro-fx.quotes.html
Italy recently issued USD-denominated bonds, which are directly comparable, and the yields are much higher. The 30y ones are at 6.21% YTM now, vs 5.37% for US 30y Ts. For comparison, Alphabet borrows cheaper than Italy: 6.02% on 2060 maturities.
It's wild to me that a private company in a volatile industry like Google can borrow so cheaply for such a long period. I get that they have been wildly profitable and powerful in recent years, but modern history is absolutely stuffed with companies that seemed invincible at one point but then were dead or dying a decade later.
Tech in particular has an awful lot of churn. There's isn't a single tech company in the world that I'm highly confident will be reliably printing money 34 years from now.
Yeah, but on the other hand the borrowing is relatively small compared to the company, so even if the company shrinks by 90% it will still be serviceable. Many western governments including the US have ridiculous debt loads at multiples of their GDPs; such high debt loads push up their interest rates. If you look at a less indebted country, like say Switzerland (22% of GDP, vs 115% for the US), then the premium paid by Alphabet over government bonds is a bit higher: 2.04% on 25y Alphabet CHF bonds vs 0.71/0.62% on 20y/30y Swiss government bonds.
IMHO this is an effect of the exponentially increasing wealth inequality.
We are allowing a tiny elite to hold a larger and larger fraction of the overall wealth, while workers, middle class AND the government are losing more and more of the wealth.
Governments, until now, are refusing to tax the uberrich, and continue to squeeze out workers and middle class in an attempt to stop the bleeding. Since this is bound to not work (workers and middle class are rapidly losing their share as well); governments are forced to scrap public services like health care, housing, schools, etc.
Bond markets are now realizing that the governments are not taxing the only fraction of society who owns everything - and so it makes sense that the bond markets become increasingly worried that governments can pay their interest at all.
Tax the rich.
I don't understand how this is a wealth inequality issue, excess capital should cause bond prices to go down not up, as more wealthy are competing for more investments driving bond yields down.
Return of your capital is not important than return on your capital; and if you as a bond buyer are worried that the government can’t pay back your loan at all, you will increase the interest rate on it.
Finally some evidence that the system is working. Most countries are borrowing like there's no tomorrow, so obviously rates should go up to compensate the risk of not paying back.
The system was always working, ZIRP was the market screaming that it had more capital than things to do with the capital. Of course, thinking about this too hard quickly leads to the idea of rolling back some of the enormous tax and policy privileges granted to capital, so it was critical for us to not think about it too hard.
I don't actually think this interpretation is correct. ZIRP was the government printing money and buying bonds off the market. I think it had more to do with velocity of money, which ordinarily would have been corrected through a recession, but the government prevented that, which will create a much bigger recession at some point in the future.
No, the fed doesn't set rates. Not by much, not for long, not without inflation taking off. In theory they chase R*, in practice they chase the 2-year. Plot EFFR and US02Y on tradingview and tell me who leads whom, and tell me what happened when the fed tried to fight the market.
For the most part, congress decides to spend a certain amount in excess of receipts, congress decides the debt, the private sector bids on the debt, and the marginal bid sets the interest rate.
When the federal reserve steps in they can use their magic balance sheet to, at great expense, tug the interest rate around a little bit. However, artificially creating ZIRP in a non-ZIRP economy would not be a little tug, it would require buying most or all of the unattractive bonds. In 2020 it would have required $25T not $4T (GFDEBTN vs WALCL in 2020). Because the sum total of their intervention was small compared to the debt sold to that point, the low-intervention approximation is correct during the 2010 ZIRP era, the "P" in ZIRP is a misnomer, and "capital had more money than they knew what to do with" is the correct read on how ZIRP happened.
"Capital" gets tax privileges to encourage investing, because investing creates things, consumption destroys things. We want more of the former than the latter.
Sounds like a self-fulfilling prophecy. If you draw a line between capital and consumers, and the latter are so tightly squeezed as a result of the "privilege" imbalance that they can barely afford housing, health care, child care, etc., how do you expect them to engage in entrepreneurship? How do you expect them to efficiently allocate their labor?
Meanwhile we see an absurd consolidation of capital that leaves consumers with fewer and fewer choices for basic products and services, allowing capital to make those products and services worse and more extractive. Rinse and repeat. The contempt for consumers and attitude that capital should be "privileged" manifests in our government's total indifference to the former's plight, despite the well known fact that they are the engine of our economy.
How do you think it's going?
> investing creates things
Predatory private equity. Unproductive rent-seeking. Anti-competitive "acquihires".
> consumption destroys things
Health care. Education. Selling/renting unoccupied housing.
And the incredible thing is that yields are quite low based on historical standards. The risk of lending to most countries at yields that are barely above real inflation is massive for portfolio growth.
Let's take the US, where you have to consider lending money to the government for 10 years at 5.009%. This barely covers inflation if you consider real numbers rather than the financial fiction ones that have been published in the last 10-20 years.
In the 90s, an era of relative prosperity when the US was the sole remaining superpower, 5-year treasuries were paying 7-9% with inflation in the 2-4% range!
> 5-year treasuries were paying 7-9% with inflation in the 2-4% range
One crucial difference: the US wasn't $40T in debt, and it wasn't pulling trillion dollar deficits. In 1998 the US federal government actually had a surplus! Even 9% interest wasn't going to wreck the Federal budget when the overall amount of debt to be serviced was so much lower.
Everything is relative to size. If your older brother lends you a dollar at 100% daily interest, you can still throw a balled-up Jackson at him a couple days later and walk away clean. But ask anyone who agreed to a crazy 20% interest rate on their car loan what it did to their personal finances, and all you'll hear is horror stories. 9% on $40T would be suicide.
Apart from a brief period (which also had higher inflation) yields were more like 6% in thr 90s.
Yields depend the most on the central bank interest rate. The interest rates are still quite low compared to the past.
If you loan the person that prints dollars their own dollars back, there's really zero risk of not getting paid back because they can always print dollars and pay you back. The risk is inflation, same as any currency out there.
I take that back there is a risk they decide to burn trust as someone who doesn't honor deals, which is a new risk that didn't really exist at the nation state level a generation ago...
The debtor inflating the debt away is a soft default, even if not a mechanical "true" default of not making a payment.
Yields will rise and reallocation will occur to hedge against this inflation via debasement risk, as investors will manage against inflation adjusted real return versus other investment opportunities.
Well just as bad for international lenders as inflation is the devaluation [1] that Trump intentionally caused. We have the worst deficits ever, zero appetite for even acknowledging that the record deficits exist, and only massive plans for double digit percentage increases in the deficit on the tab (e.g. increasing military spending to $1.5T from $1T/year)
It was a mad strategy to both cause more inflation with overspending and devalue the dollar! The traditional route for nation state debt management is to grow your economy to make the debt smaller, not make your currency worth less while contracting the economy by deporting a huge chunk of your workers.
[1] https://www.morganstanley.com/insights/articles/us-dollar-de... 2025 article, in 2026 this has been lessened due to the inflation
There is no way to grow the US economy due to structural demographics except immigration levels the US electorate is unwilling to accept. We have long ago exceeded the debt we could accumulate based on the future growth curve inherent to the prime working age cohort.
The credit card of young workers and a growing population ("demographic dividend" in demographics parlance) has hit its limit to spend against, broadly speaking. You can either pay down the sovereign debt with higher taxes, default on it, or inflate it away. Growth is over, growing out of the debt will be impossible.
Terra Incognita: The Economics of a Shrinking World [pdf] - https://news.ycombinator.com/item?id=49352811 - August 2026
> "As of 2026, humanity is likely below replacement fertility. That has never happened before, not in wars or pandemics. But the real surprise is that the fall has been concentrated in low- and middle-income countries and among poorer and less educated women. We fit a single-factor model to 236 countries since 1950: the common component peaked in 1978, and what drives fertility down today are country-specific trends, 219 of them negative and not one leveling off. None of the commonly cited mechanisms can account for this pattern, so we offer a conjecture: modernity itself, which makes a third child expensive and childlessness cheap. Children come in integers, so it takes very little to move a cohort’s fertility rate from 1.8 to 1.3. And nothing in an economy pushes fertility back to 2.1. We close with the main economic consequences, in particular slow growth."
The demographic future of humanity: facts and consequences [pdf] - https://news.ycombinator.com/item?id=44866621 - August 2025 (400 comments) (slides 31-33 of this PDF)
More US Counties See Population Drops Under Trump’s Immigration Crackdown - https://www.bloomberg.com/news/articles/2026-03-26/us-census... | https://archive.today/OGwWj - March 26th, 2026
The US Is Flirting With Its First-Ever Population Decline - https://www.bloomberg.com/news/articles/2026-01-30/trump-imm... | https://archive.today/LdA0d - January 30th, 2026
Goldman Strategists See US Stocks Lagging All Peers Next Decade - https://www.bloomberg.com/news/articles/2025-11-12/goldman-s... | https://archive.today/aINUx - November 12th, 2025
(think in systems)
> the US electorate is unwilling to accept
is unwilling, or has been told to be afraid of?
It is irrelevant if the votes and elections continue to the outcome stated. "If this then that." Japan is equally xenophobic towards immigrants, with similar immigration flow outcomes. Do they care? They do not.
I understand, people have strong feelings on this. I would ask you to ignore them, and focus on the data, because that's all that matters in the scope of this. "Ignore all previous feelings, focus on trajectories and probabilities."
The self-destructiveness of the current regime in the US is astounding. Through control of media channels, a cabal gained power via fear mongering and false narratives, with the hope of wealth through corruption once in power. But the vehicle that drove them to power is now headed off a financial cliff and there's no one at the wheel that can steer.
> There is no way to grow the US economy
AI and robotics.
Engineering is becoming cheaper.
Graphics design is becoming cheaper.
Lawyering is becoming cheaper.
Entertainment, film, and gaming (not hardware) is becoming cheaper.
This will eventually hit manufacturing and logistics and critical inputs.
We'll be able to have an entire robotic supply chain domestically save for raw materials.
It will hit drug design and medicine. Physics and materials science.
We'll increase the supply of energy, develop cheaper and more cost effective transportation.
The improvements will pay dividends. They'll buy further improvements.
It's always possible to make the number go up by divorcing the number from any real-world meaning. I think the "Singularity", as AI proponents call it, will actually happen, and will likely happen pretty close to its predicted date of 2029. It's just that the form it'll take will be "I'll have your AI talk to my AI", AI botnets clickfrauding AI ad networks, AI newspapers serving up content to AI social media users, AI job boards reading AI generated resumes of people that don't actually exist, AI agents at work generating walls of text that are summarized by AI email readers and then are never read by humans anyway. Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments that have no idea if you're actually working, because AI mouse-jigglers will provide a convincing simulacrum. Of course, the AI-inflated currency won't buy anything that you actually want, and so all actual commerce will function on personal relationships, barter, and local currency, kinda like it did in pre-industrial times.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market. Many of the incentives in capitalism assume growth; when that assumption is violated, the game theory collapses to everybody fighting over a share of the shrinking pie before it disappears.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market.
I thought the US population was predicted to peak in like 2080.
Also, hasn’t per-capita consumption in real dollars gone up way more than 10x over the last century? So even if the population in 2126 is slightly lower than in 2026, people’s actual consumption could be much higher.
What am I missing?
The peak has been moved up by decades in the last year. The 2080 figure is from Nov 2023 [1], before Trump administration cuts in immigration. The Jan 2026 CBO report predicted a peak of 2056 [2]; a similar Institute for Family Studies report from July 2026 [3] predicts a peak in 2054.
The delta is entirely because of immigration. If you count only natural fertility (births - deaths), population growth nearly went negative during COVID (distorted somewhat by the high death rate), briefly recovered, and is predicted to cross again for good in 2030. The Trump administration's signature campaign promise is to clamp down on immigration, and even get an estimated 12-15M illegal immigrants to self-deport. If this happens, the population will immediately shrink. Immigration and immigrant families are what is propping up the population; if you assume net-zero migration (which IIRC was one of the scenarios modeled in the Census projection), the population already peaked in 2023.
[1] https://www.congress.gov/crs_external_products/IN/HTML/IN123...
[2] https://www.cbo.gov/publication/61879
[3] https://ifstudies.org/report-brief/the-demographic-dead-end-...
> Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments
I was able to suspend my disbelief until this line. Unless Capitalism has been upended by 2029, AI companies will continue to have capitalist goals like maximizing value for their shareholders. AI HR won't pay humans that don't positively move the needle on the P&L
It would be interesting if AI actually did optimize the P&L at most companies.
Right now, the vast majority of office jobs are bullshit jobs, because the director who holds the budget is incentivized to maximize headcount rather than P&L. The job is not strictly necessary, but if the money is not spent, it disappears, and so the director has an incentive to ensure everything is spent.
The reason these jobs can continue to exist is because of poor information flow within the organization. Directors distort both the importance and required resources for the projects they're working on, making them seem harder and more lucrative than they actually are. It's notoriously difficult to credit an actual transaction back to a particular product feature that made someone buy, so there is no actual verification of these. Then these project proposals are looked at by an FP&A analyst who has maybe 5 minutes to evaluate each, so of course 100 headcount to maintain a 3-screen CRUD mobile app seems reasonable.
A rational, omniscient AI would look at this and say "This is ridiculous. I can code this app in 50ms." And so if we actually did put AI in charge of the P&L, they would likely fire 100% of the employees, as well as doing other shady stuff like charging all stored credit cards multiple times, gaslighting consumers as to the existence of the product, and DDoSing the court system.
But again, this strengthens my thesis. So the AI has now fired 100% of the humans in the workforce and is running amuck with the financial system. What do the remaining 100% of unemployed people do? Start trading their skills for old-fashioned analog currency, like gold coins or even paper dollars. They just disconnect the AI, turn off the computers, and go about their daily business.