What Rising Global Bond Yields Mean for the Economy, and Your Money

**Kusha Navadar** (0:10)
It's The Brian Lehrer Show on WNYC, I'm Kusha Navadar filling in for Brian. Now we're turning our attention to the bond market, specifically the US Treasury bond market. I know it's not the flashiest topic, not nearly as glamorous as its cousin the stock market, but it is without a doubt the most important financial market in the world. It affects our pension funds, global interest rates, the health of the stock market. And here's what makes it super interesting right now. The bond market has been looking a little odd. The yield rates on bonds are going up. That means if you loan money to the government, and that's basically what a bond is, the government has to pay you back at a higher rate. And for some of these longer term loans, like the 30 year treasury bonds, that yield rate has climbed higher than we've seen it climb since 2008
There are a lot of reasons for that yield rate going up, but to give a sense of the bigger picture, it's important to understand that the biggest lenders, the banks, the foreign countries and pension funds, have traditionally seen the US treasury market as a safe, a stable, relatively low interest place to store money. But recently, these treasury bonds have become a less attractive option, and there's a lot of reasons behind that that we'll get into. There's inflation, expensive wars, more borrowing to pay for things through the government. All of these things have made the US treasury bonds less attractive to lenders, and we need those lenders. The only way to make them more attractive is for yield rates to go up.
Now that might seem a little sticky, but today we're going to make treasury bonds action packed. You're going to be dropping the words bond yield rates at dinner parties for weeks to come. So joining me now to make that possible for both of us is Mary Childs. You may know her from Planet Money, where she used to be a co-host, or from her book, The Bond King. Now she's got her own podcast called Mary's in America. Mary, welcome back to WNYC.

**Mary Childs** (2:18)
Thank you for having me.

**Kusha Navadar** (2:19)
And listeners, we want to hear from you. We're taking your questions on all things bonds and debt. Are you following the bond rates lately? How is it impacting you? Maybe you've made changes to your investments. Do you have a question for Mary? Give us a call or send us a text. We're at 212-433-9692.
That's 212-433-WNYC.
And just to make a quick correction there, it is just Mary in America, the name of your podcast. Just one of me. That's right. Before we dig into the current news cycle, can you paint a picture of the bond market for us? Like what's a treasury bond? Why are treasury bonds so important to the global economy?

**Mary Childs** (2:58)
I just want to say these are my favorite questions and I'm so excited to be here. It's never a good sign when I get to talk about bonds, but I do love it. And I will say, I think it's really glamorous. I just had to put that forward. So a treasury bond is, as you said, it's simply when investors, institutions, anybody with money, it could be you or me, it could be a pension fund, it could be an insurance company in Japan, they lend money to the US government. The US government has a gap between how much money is coming in in revenue and it wants to spend more. So there's that gap and that gap needs to be financed in the markets. And so they need to borrow from people like you and me or Japanese pension funds and insurance companies or whoever it may be, or the Central Bank of China. And to do so, they go to the bond market, they borrow from these groups. And pay a little interest for that borrowing. And then at the end of the life of the bond, you know, we agree it will be 10 years, it will be 30 years, it will be 7 years, whatever it may be.
And at the end of the life of that bond, they pay back that amount that they borrowed. And the investor walks away happy because they got that interest along the way and they got their money back. And that's the fundamental promise. And the interest rate is set not through any kind of magic or science, but through this sort of art of knowing what investors feel about the government. And I think about six different types of things. There's like, how is the government looking today? How do I feel about the deficit levels and the spending levels of the government? Do I think that the government is going in a good direction? Do I think that the economy is going in a good direction? Do I feel like the global marketplace is giving me better opportunities for lower risk and higher yields? That's always what you want, more money for less risk. That's impossible to come by. There's always more money for more risk.