ES version is available. Content is displayed in original English for accuracy.
Advertisement
Advertisement
⚡ Community Insights
Discussion Sentiment
47% Positive
Analyzed from 4320 words in the discussion.
Trending Topics
#debt#bonds#more#rates#inflation#term#money#risk#interest#yields
Discussion (141 Comments)Read Original on HackerNews
* https://www.investing.com/rates-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.
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.
For the most part, congress decides to spend a certain amount in excess of receipts, 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. In 2020 it would have required $25T not $4T as the federal reserve would have had to buy all the unattractive bonds (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 ZIRP era and the "P" in ZIRP is a misnomer.
Predatory private equity. Unproductive rent-seeking. Anti-competitive "acquihires".
> consumption destroys things
Health care. Education. Selling/renting unoccupied housing.
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?
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...
There have been over 70 incidents of overt domestic default since 1800. The United States defaulted in 1790, when a portion of the interest it owed was deferred for 10 years, and technically defaulted again in 1933 when it abrogated the gold clause.
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.
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
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!
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.
Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
I wish you luck. Endless promises and short term thinking are the main things the system incentivizes. Each politician is temporarily renting their seat, paid for by other people. Each bureaucrat is studiously, steadfastly avoiding learning anything that threatens their continued employment, which is paid for by other people.
I think Clinton was the last us president to balance the budget and start reducing the deficit so I guess see what he did.
Then 1994 happened, and the Contract With America. The Republicans took both the House and the Senate, and they passed a balanced budget , then, whether Clinton liked it or not.
So that's what "Clinton" did. He pretended he was going to do something, and the Republicans called his bluff, and made him do it.
Note well: Republican majorities in any other set of circumstances have not yielded a balanced budget. I'm not saying that they're the answer (what they did under Trump shows that they very clearly are not the answer for fiscal responsibility). All I'm saying is that "Clinton balanced the budget", while technically true, isn't really the way that played out.
Maybe we should consider the possibility that there is no such candidate, or if there is, they cannot compete against the 'populists'. What then?
You have to consider the fact that the populists are only popular because all the other parties in the last 20 years have made endless promises to the voters and failed to accomplish a tenth (if I am being generous) of what said they would do.
At some point, the blame as to lie also with whoever came before them too.
Who could you vote for, in any democracy, that would fit this?
Also, how many voters would have the wherewithal to identify such a person?
Note I said "some", before rushing to mention all the examples of green parties engaging in misguided policies. Those also exist
In the anglosphere it's more difficult because first-past-the-post voting makes such parties unlikely to succeed or be relevant
In my country people voted in a party as majority that not once left their terms peacefully in past, AFTER our genZ ousted the other party, that came to power as a majority 17 years ago, changed constituency and controlled the parliament using majority, and turned into an autocracy
Now this party is shaping everything up using their majority for their favor (no surprise), ignoring all the agreements agreed upon by all the parties before election, under interims government.
All those blood, deaths, injuries are wasted.
Humans are designed to operate in smallish clans with benevolent dictators whose right to rule is based on social currency with people they personally know. Anything else is a house of cards on unstable foundation.
I'm not sure how you fix that, but democracy so far has maybe been the least bad patch.
Rates going higher increases interest expense materially. You either rack new debt or you cut in places that are uncomfortable. The point is: responsible leadership in the developed world has gone mia for decades. There's a price to be paid that's real.
https://www.hbs.edu/faculty/Pages/item.aspx?num=68142
Accounting for the asset holding, Japan's net debt is even lower than UK/US.
>The key lies in the Japanese public sector’s operation of a de facto sovereign wealth fund. Unlike countries such as Norway and Saudi Arabia, which fund such vehicles with national savings from natural resources, Japan finances its investments largely through domestic borrowing at very low floating interest rates
.... >In the case of Japan, evaluating fiscal positions solely through the lens of gross government debt can present a highly distorted picture of the overall fiscal health of the country.
It should be noted that even still almost all US debt is held locally.
These people do not exists. If a politician ran on such a platform, they would never get elected.
The fact is in modern democracies like in the EU or in the US there are simply too many people who rely on the status quo directly or indirectly.
Its almost comical, in France politicians have run, got elected and have swept the debt problem under the rug for the last 40 years, then they leave office and suddenly decide that the debt is a massive problem but that there was nothing they could do about while in office so they never did anything but now they speak about it.
And they all do it. Left, right, center, it's all the same.
Conservatives:
Liberals: Deficit rate = (federal outlays - federal receipts) / GDP. Change = deficit rate in final fiscal year - deficit rate in first fiscal year. The % symbol below means percentage points of GDP, not relative percent change. The first and last fiscal years whose end dates occurred during each presidency are used. Transition fiscal years can therefore span two administrations. Figures are OMB actuals through FY2025 and are rounded to 0.1%.:)
Also some of the numbers are very sensitive to start/end dates (remind me, did anything happen in 2020?)
Just seems like one of those weird ambiguities.
Promises kept. All is good
Nobody has ever tried this before!
I'm not predicting that this will happen, but we do need to take the debt seriously and not assume we will be able to just print money to get rid of it.
Every sovereign can print money and repay lenders, but doing so cause an inflationary cycle. When it looks like that is inevitable, borrowing rates start spiralling, so you have to print more money, and soon you are Zimbabwe.
Like the US is catastrophically indebted -- both parties have been negligent on this, though one party has been much, much worse than the other -- and right now there's a certain defeated malaise about 40T in debt. The last time bond rates were this high the country had only $6T in debt, and even that was considered a catastrophic level, and bond rate trends are...not looking good for those want government funds leftover after servicing the debt.
"Oh but we'll just grow the economy..."
The debt has grown by 6.5x, and the GDP has grown by 2.8x since 2002. The math just isn't mathing. And remember that bond prices were historically low, and if there was ever a time to pay down the debt....
Nope, $2T deficit, "hide in the ballroom bunker and hold the world hostage with the nuclear launch button" projects, and now a hilarious $1.3T bribe to voters. Utterly busted. It is astonishing that it took this long for the world's lenders to chuckle and say nah.
You just pay off old promises that were expected to be kept.
The real risk is that new lenders will not be willing to lend you, yes. But not outright inflation.
Debt service costs as a percent of GDP are in fact lower than they were in the 1980's, when things came out fine. Is this the best way to run the budget? Likely no. Should we make policy changes? Certainly yes.
Is the best way to drive that policy argument flinging around adjectives like "catastrophically indebted". No. If you have a suggestion make a suggestion. Screaming about "The Problem" without discussing policy is echo chamber logic.
The real problem is not the debt, but the social instability caused by the measures taken to address the debt.
https://youtu.be/ajH6YVhdOZU?is=Xht8Qsd_eGqnS7wW
But debt also accumulates, and usually faster than GDP growth. Until debt servicing starts eating your budget. Which is a slowly encroaching killer
I find it difficult to draw conclusions just yet. Yes, Germany is under-investing and that hurts. But with another 20 years of hindsight it might look like the lesser evil
Both Warsh and Bessent are pupils of Druckenmiller, but Warsh seems aligned with Druckenmiller regarding letting the market naturally settle on appropriate bond yields, whereas Bessent is being a Trump puppet and attempting these various failed interventions to artificially lower yields.
I hope Warsh stays strong and doesn’t bend the knee!
- James Carville
10y OAT are at 4.5% and rising with almost 100bps difference with Germany and no budget for 2027 since there is no majority in the parliament.
There is also a 6% deficit expected and growth has been revised down to 0.4% although during the first 6 months of 2026 there was actually a decrease of 0.2% of GDP in total so finishing the year in recession is totally possible.
Unemployment could also reach around 9% (15% in real terms if you count the people who have given up and/or been removed from the stats since they ran out of benefits).
Finally gasoline could reach 3 euros/liter (USD $13 per gallon) before the end of the year (already sitting at 2.5 euros/liter in many parts of France right now).
> the order of magnitude that's needed to put the country back on its feet
The amount of reforms needed in France could fit in an encyclopedia. LFI or the RN will not fix this mess and the center who has been in power for 10 years is all but useless. The old center-left and center-right parties have all been in power also and led us to this place which means that are not the solution either.
Seems to me that France is well and truly stuck on a slow but certain decline. But the other EU countries are not doing much better either.
/s
You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
What's different between the two is that apparently China hasn't made an equivalent dent in its oil reserves, despite no significant reduction in travel, and despite reducing its import demand by 1 OPEC.
It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
Apparently the main reason they have started buying crude again is not for internal consumption as much as taking advantage of the massive crack spread in refined petroleum products (like diesel) which they export.
From a distance, those look like pretty sound theories.
It's wild that the pols and talking heads in the US have been screeching about how "dangerous" China is since the 90s (I remember family members making crude jokes about why I should be learning Mandarin instead of Spanish in middle school) and, yet, here we are doing everything we can to hand them the reins of world power.
"There's no shame in being second best!"
[1] https://youtu.be/53tGLKlsQv8
I think the easiest explanation is that this probably isn't true. The US SPR is underground, it would be quite easy for China to manage its equivalent in secret, for whatever reasons.
The Chinese EV shift is real and significant, though.
Those biggest cities are majorly influential in absolute energy demand and also patterns of use.
The second tier cities will be buying the big cities used EVs in not too long.
If you buy an AI issue, then the AI company has the bank deposit and the bank still has the matching reserves needed to buy government bonds in the primary market. All that changes is the ownership tag on the bank deposit.
That said, there is a meaningful difference in terms of who has control of the money, and what they choose to do with it. Bank reserves are a red-herring; before the investor chose to buy either AI or government bonds with it, it was sitting in a bank deposit where the bank had parked it in short-term Treasuries. But prices are set on the margin (because again, money flows through markets, not into them), and so it is the act of that investor choosing to buy AI company bonds rather than government bonds that sets the relevant interest rates of both.
A related confusion is that the bank reserves are parked in short-term T-bills, whose interest rate is largely controlled by the Fed, while the investments we're talking about are AI corporate bonds vs. long-term government bonds. These are three different asset classes that trade on three different markets with three different interest rates.
I suppose in that respect, all investments compete.
Op-eds claiming the opposite because "trust me bro" would also make me inclined towards the "data center build out for AI factors in for rising yields in sovereign debt"
The more clear it is, the cheaper 30 year bonds become.
You mean due to Trump? Tariffs and Iran war caused this.
Notice that the stock market is at all time highs because 50% of the economy is grift now and not real. That is why Republicans go into vast deficit spending to pump up AI and worthless "high-tech", "disruptive" defense stocks.
Trump (and British pound saboteur Bessent) don't care one bit if the US plebs and the rest of the world suffer. The game is printing money, give it to grift companies like AI, have family invest early and get out if everything collapses. Probably they get into real estate cheaply due to foreclosures.