Truth from Bonds

May 29, 2025: Bond market yields  are a truthful indicator of economic health. When yields rise, borrowing costs for governments, companies, and consumers go up, which can slow down spending and investment, which can slow economic growth. The bond market reflects expectations about inflation (from tariffs, for example) and rising government debt. And higher  deficit spending, like from “a big beautiful bill”, for example, may lead to more debt and  push yields higher which in turn can lead to slower growth. Rising bond yields may also indicate concerns about fiscal issues. 

The issue is that global bond markets worry that the U.S. government can’t manage its finances and will continually spend more than it takes in from taxes, thus borrowing heavily to bridge the gap. Big deficits lead to more debt, endless political chaos and drama makes the situation  riskier. So bond yields (think interest rates) adjust upward to compensate for the risk. To bring this back home, don’t expect mortgage rates to drop anytime soon.