There Is Nothing “Irrational” About Rising U.S. Bond Yields

Policymakers often blame “irrational” markets when government bond yields rise.
But the move in U.S. Treasuries is not happening in isolation.
Long-term yields are rising across much of the developed world as governments run larger deficits, issue more debt and ask private investors to absorb more duration.
The U.S. is part of that broader repricing.
France is dealing with fiscal stress.
Japan is seeing yields return to multi-decade highs.
The UK remains under pressure.
Even Germany is borrowing at levels that would have looked unusual a few years ago.
One major exception is Switzerland.
Swiss government debt remains relatively low, fiscal policy has been far more restrained and its bond market has not experienced the same degree of long-end repricing.
That contrast matters.
Markets are not randomly punishing high-debt countries.
They are demanding more compensation to finance governments with larger deficits and heavier future issuance.
When debt supply rises, the price of that debt falls.
And yields rise.
That is not irrational.
That is the market doing exactly what markets are supposed to do.