Bond Yields Are Rising. A Bond Nerd Explains Why It Matters

SPEAKER_1 (0:01)

Are you sucking wind from trying to keep up with AI and its impact? Take a breather and tune in to The Intelligence Shift, Morning Brew's new podcast with PWC. It bridges the gap between big picture AI concepts and what it actually means in practice. Host Dan Priest is joined by expert guests to discuss AI's role in sports, music, HR, and more. Listen to The Intelligence Shift wherever you get your podcasts.

Robin Wigglesworth (0:24)

You cannot pretend to know anything about global finance and the global economy if you don't understand the bond market. It is what defines everything. Everything else is basically a sideshow. If you don't understand the bond market, you don't understand finance, I'd say.

Toby Howell (0:38)

Good Morning Brew Daily show. Just Toby here today since Neal is on a well-earned vacation. But I won't be alone. I'm joined by a self-proclaimed bond dude to talk about, you guessed it, bonds. It's Monday, October 12th. Let's ride.

So who brands themselves as a bond dude? Robin Wigglesworth does. He's an editor from the Financial Times and author of A Fabulous Debt, A History of the Bond Market. I'm chatting with Robin today because I think we've said the word bond on the show more in the past few months than Ian Fleming did over the course of every James Bond book. Yields, coupon rates, US treasuries, what does it all mean? And more importantly, how does it affect you?

Robin and I talk about where bonds come from, if the U.S.'s borrowing is as big of an issue as it seems, and how if you don't understand the bond market, you can't understand the world as we know it. But first, a word from our sponsor into it. All right, everyone, let's play a little game of would you rather. Would you rather deal with complexity or simplicity? Feels like a toss up, simplicity is so simple, but complexity, man, is that a lot to deal with. But I'm craving simplicity, same as CFOs in finance team stuck logging into four systems to close one month, rebuilding every report in a spreadsheet and paying for add-ons. They were told they wouldn't need. Thankfully, there's the Intuit ERP for that. Your team runs one close, however many entities you have. They build their own reports, no consultant required, and getting started doesn't take over your year, all without the legacy ERP baggage. To learn more, head to intuit.com/erp. That's intuit.com/erp.

Now, here's my interview with Robin.

Robin, thanks so much for joining us.

Robin Wigglesworth (2:31)

No, thanks for having me, Toby.

Toby Howell (2:33)

All right. So you make the case that the bond market is the most powerful force in the global economy with the ability to bring governments to its knees. So why is it that we obsess over the stock market when the bond market arguably matters a lot more to our everyday lives?

Robin Wigglesworth (2:49)

That's a good question. I think it's just the fact that the stock market moves around a lot more. We want motion.

We watch Formula One because it's fast. We don't watch it because it's really slow. And the bond market, at its best, it is supposed to be slow. It is supposed to be boring, but it is the most important bit. And it is fascinating and it's important. And yeah, I mean, it's my first love as a financial journalist. So I get a little bit resentful when I see everybody talking about the stock market all the time.

Toby Howell (3:16)

But let's back up for a second here. A lot of people hear bonds, their eyes sort of glaze over, and they just sort of start smiling and nodding. Define for us what a bond is and what they can be used for.

Robin Wigglesworth (3:30)

It's a tradable loan. It's a tradable IOU. It's just like a stock. You can buy and sell it on the stock exchange. Actually, most stock exchange started as a bond trading venue, like the New York Stock Exchange. People traded bonds there long before they did stocks.

Because of that, that's why you get things like the yield. The yield is the market interest rate you get, which is like the price relative to the actual coupon, the interest rate that it pays.

It's powerful because it's the bedrock to the entire financial system. It's where companies, governments, hospitals, municipalities, they all fund themselves there. The stock market, I always joke it's like trading Pokemon cards. It's fundamentally if you and I buy a stock between each other, it doesn't really affect Apple or NVIDIA. But every day, somebody's selling a bond. Whether you're town, your university, your government, the company you work for, that's where money actually, the actual flows of money, that's the bond market. That's why it's so important.