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**Kai Ryssdal** (0:31)
Okay, what do you like, the bond market, meat packers, or gray? The color. No way, you don't have to choose. We got them all from American Public Media.
This is Marketplace.
In Los Angeles, I'm Kai Ryssdal, Tuesday to day 18, August good, as it always is to have you along, everybody. 30 years is a long time. It is a long time in life, and it is a long time in financial markets. But all of a sudden, that 30-year time frame seems very, very close at hand. I'm talking here about 30-year bonds, government bonds in particular, the yields on which, the interest rates they have to pay, right? The yields are honestly getting a little alarming. We have touched on this a couple of times in the past couple of weeks. We're going to do it again today with Robin Brooks. He is a senior fellow at the Brookings Institution. Robin, welcome back to the program.

**Robin Brooks** (1:32)
So great to be with you, Kai. Thanks for having me on.

**Kai Ryssdal** (1:34)
All right, I'm going to quote you back to yourself from the socials today.
Global bond markets, you wrote, have caught fire. Reckless fiscal policy is catching up with governments. Emphasis there on governments, many of them. 30-year yields, long bond yields are up all around the planet. What's going on?

**Robin Brooks** (1:54)
So long-term yields are different from the kind of policy rate that the Fed sets, right? So when we have a Fed meeting, the Fed sets short-term interest rates. Long-term interest rates are very different because they incorporate risk premia.
Of course, 30 years, as you said in your intro, that's a very long horizon. So financial markets over that long horizon, price risk premia for inflation, for policy uncertainty, for the amount of debt that you have. So what we've seen the last couple of days, and honestly over the past year, is that these long-term yields have risen massively, most of all in places that are highly indebted or and or politically dysfunctional. So places like Japan, France, the UK, Italy, and of course also the United States.

**Kai Ryssdal** (2:45)
The United States, yeah. So it is a global situation. We've touched on the fiscal irresponsibility of some of those countries, including this one. I want to run through a couple of other possible causes.
AI companies are borrowing trillions and trillions and trillions of dollars. Maybe that was one too many trillions, but you know what I mean. There is, however, only so much capital to be invested. Could that be part of the challenge, that AI borrowing is competing with this necessary government borrowing?

**Robin Brooks** (3:16)
So, Kai, I think you're totally right. There's many things that are driving what's been going on lately. If you look at when did long-term yields start to rise, big time in the most recent episode that we're seeing right now, it was after the most recent Fed meeting. So, that was on July 29th. The Federal Reserve kept rates on hold. And so, markets here are worried that there's something wrong with monetary policy. And honestly, they're worried about the politicization of the Federal Reserve, that the Fed is keeping rates low, because people feel like it's under the influence of Trump. The other thing, obviously, that's happening lately, is that it feels like oil prices are going back up again.
And so, bond markets obviously don't like that, because they think it leads to inflation. But the bigger issue that you're mentioning is, in the end, there is a finite pool of capital. All the AI investment, the hyperscalers, and so on, everyone's chasing after the same amount of money.
What I would say in terms of differentiating these different factors is, in the end, yields have risen most for countries that are most highly indebted. So that tells you this is about some kind of sovereign risk premium. All right.

**Kai Ryssdal** (4:33)
So let me back you up to the Federal Reserve. And you have been clear that you think some of the criticism of Warsh is unwarranted. And that's a whole different podcast for us to get into. But is it possible that part of this reaction is an uncertainty premium related to the Federal Reserve that the bond markets just don't know what he's thinking? You know?