Juggling Dynamite

As bond yields/interest rates rise, everything is ripe for repricing. The segment below examines different theories driving rising yields and why each signals elevated risk in financial markets.

What’s next for the Treasury market? Jeff Gundlach, “The Bond King” himself, points to oil and bond supply as two culprits behind the selloff. His bigger worry is the trajectory of U.S. debt, now north of $40 trillion, and the risk that policymakers get pushed into something drastic, even a Treasury restructuring. I’m not there yet. I lay the yield spike mostly at Kevin Warsh’s feet, since his approach has left the bond market thoroughly confused about where policy is headed. We also sparred over the shape of the next recession. I see a classic risk-off episode sending money straight back into bonds, just as we’ve seen time and again. Jeff suspects we’ve entered a new regime where the old relationships no longer hold. Then there’s the AI mania, where Jeff reads widening credit spreads as an early warning sign. Is a crisis around the corner?  Catch the replay for a wide-ranging conversation on the dollar, the Fed, gold and the full spectrum of fixed income. Here is a direct video link.

The segment below delves into the history of bonds and why and how they form the foundation of the global financial system. The discussion starts out a little slow, but the second half picks up.

The Financial Times journalist and author of ‘A Fabulous Debt’ explains how bonds accelerate economic growth but have also contributed to some of history’s most significant financial crises.

Today’s guest on The Long View is Robin Wigglesworth. Robin is the editor of the Financial Times finance blog, Alphaville. He’s also the author of Trillions, which is the definitive book on the past, present, and future of passive investing. Robin’s joining us today to discuss his latest book, A Fabulous Debt, which is a history of the bond market. The history of the bond market is marked by war, peace, market mania featuring a very colorful cast of characters, and so much more. Robin is such a brilliant writer that he really brings every aspect of a history to life. One of the highlights of the show was when he was talking about the huge amount of capital spending we’re seeing in artificial intelligence and how it parallels the railroad boom in the 19th century. He made the point that debt-fueled capital spending sprees tend to end quite badly, although the scale of capital investment in AI this time around is still quite a bit smaller. As Robin points out, history rarely repeats, but often rhymes, and we might be living through one of those rhyming moments today.  Here is a direct audio link.

When you look around the poker table and wonder who the sucker is, it’s you. This is not a financing event anymore. What’s really going on is people are unloading shares. They’re unloading shares on retail investors and on quick-flip institutions who were able to back in and out. So, you have to look at it accordingly and realize that this is really what they’re saying: this seems like a good time to get out, and I’m an insider, and I want out.

Ed Elson is joined by Paul Kedrosky to break down the biggest takeaways from Anthropic’s S-1. Then, Jay Ritter joins the show to discuss why Oura delayed its IPO and what the decision says about the broader IPO market. Finally, Ed shares his take on the news that Manchester City was found guilty of financial violations. Here is a direct video link.

Interest rates are a self-correcting mechanism, particularly in highly leveraged markets and economies.

Lance Roberts and Michael Lebowitz explain the dynamics well in If Bonds Get Crushed, Stocks Will Get Crushed Even More:

If Treasury yields continue significantly higher, stocks are likely to feel even more pain because we’re a debt-driven economy. The cost of money matters enormously for future economic growth.

A lot of companies borrowed aggressively in 2020–2021 when rates were incredibly low. Debt that was financed at 2%–3% is increasingly coming due, and companies may now have to refinance at 5%, 6% or 7%.

What happens when interest expense suddenly doubles or triples?

Companies have to find the money somewhere. That can mean layoffs, lower CapEx, reduced investment and cuts elsewhere in the business.

Higher yields therefore don’t stay confined to the bond market—they gradually work their way through the real economy. And there’s a second problem: asset allocation. Imagine the 10-year Treasury yielding 8%. How much capital would move out of stocks when investors could earn something close to 8% in Treasuries without taking equity risk? That rotation is already happening to some degree.

The higher yields go, the more attractive fixed income becomes relative to equities. But there’s an important paradox here: higher rates ultimately create the conditions for lower rates. If yields rise far enough, they destroy economic demand. Growth slows, companies cut spending, unemployment rises and inflationary pressure weakens. Eventually you get disinflation or potentially deflation.

It’s similar to the old saying that the cure for high oil prices is high oil prices. Eventually high prices destroy demand.

High rates can cure high rates for the same reason. That’s why simply extrapolating yields higher forever misses how dynamic markets and economies actually work.

If yields became extreme and the economy entered a deep recession, you could initially see enormous pressure across virtually every asset class as investors scramble for liquidity.

But eventually those high bond yields become incredibly attractive.

If inflation starts falling toward 1%–2% while the economy is in recession, investors aren’t going to ignore Treasuries yielding 5%, 6% or potentially more. Money would pour into bonds, pushing yields lower and bond prices higher.

9-24-26 If Bonds Get Crushed, Stocks Will Get Crushed Even More
w/ @michaellebowitz

If you think bonds are about to get crushed, understand what that would mean for everything else.

If Treasury yields continue significantly higher, stocks are likely to feel even more pain… pic.twitter.com/YtpUFxJECk

— Lance Roberts (@LanceRoberts) September 24, 2026