Great question, few good answers.

"The big question is why yields have risen so much."

• Is it because investors want more compensation for perceived fiscal unsustainability?
• Does it reflect expectations of much faster growth?
• Is there a global war for investment funds and limited lenders?
• Has the Iran war raised the prospect of continued high inflation?
• Is it that central banks signalled the need for persistently higher short-term interest rates and markets are parroting this back?
• Have monetary policymakers lost inflation-fighting credibility?
• Or are bond markets now dominated by flighty hedge funds that can make huge returns if they get a negative narrative to stick?

Chris Giles goes through some of these and provide some decent rebuttals.

Federal Reserve chair Kevin Warsh said there were three broad reasons at a press conference in September: US economic strength, competition for capital and difficult geopolitics.
The more important thing he said, however, was that explanations for changes in bond yields “tend to be overdetermined”. In other words, there are many competing but unprovable theories. And he is right.

"The single clearest cause of the rise in bond yields, as the chart below shows, was President Donald Trump’s decision to initiate war with Iran, before which yields were generally falling"

Seems obvious, but I'm still a little stuck on the transmission mechanism : there's no reason, in principle, that wars or even oil price shocks ought to result in higher yields

The analogy being the 1970 had a few other critical components: labor unions aggressively striking for higher wages, setting off a price-wage push; and central banks eager to accommodate the real-cost push with new money.

There's no risk for the former, as labor unions worldwide (minus the Nordics, but they're pretty meek here) are a ghost of their former self. And the latter is entirely under our own control; central bankers can decide not to accommodate oil price increases (or actively crush demand... ), thus gaining credibility for their monetary policy and an indication of how independent they are from the fiscal authorities.

I guess, then, the bond market is pragmatic and saying "Fat chance, Den; dream the fuck on — dudes will print."

STILL, I find it kind of weird, then, to jump past the intermediate steps and conclude that wars (or oil prices) cause inflation and thus yields. No, (central) banks printing money cause inflation, always and everywhere. For immediate analogy: Planes don't crash because of gravity, even though of course gravity is involved and 'ultimately' the cause.

There is no doubt that short-term interest rate expectations have risen across advanced economies. At the start of the year, the Fed was expected to cut rates to almost 3 per cent and now is expected to raise them to 4.75 per cent. That is a huge shift.

Another commonly quipped reason is that AI has unleashed massive productivity gains that are about to swamp GDP numbers -- thus rates ought to go up (via the real economy). So far, only a single quarter of a sliver of such indications. AND:

anyone who remembers 2022, when the US Inflation Reduction Act led to excitement about green growth that did not materialise, should be wary of predicting a massive increase in US growth rates.

Also, this investment boom is not that visible (outside specific sectors):

The other option is that capital is expensive now, with AI debt issuance swallowing up all the air in the room, lol mixing metaphors:

Higher yields could simply reflect a massive increase in demand for investible funds that is not met by increased supply. The chart below, which I have borrowed from Toby Nangle’s excellent piece, shows that debt issued by AI hyperscalers accounts for 13.8 per cent of US Treasury issuance, up from only 1.3 per cent in 2024. In other words, there has been a big increase in demand for debt from the AI sector.

there could still be a general change in the balance between overall debt issuance and debt demand among investors. To the extent that the war for capital is a valid explanation of higher long-term yields, it is more a story of excess debt overall than one to be pinned on the tech bros.

"No one I have spoken to thinks government debt markets in advanced economies are currently disorderly or signalling impending default."

eeeh, cute. Maybe look further afield than your standard sources, fren?!

Archive still messing w us... lmk if you want the full article -- lots of good graphs in there.