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This commentary was recorded in September 2026. Market conditions and policy decisions change quickly, and the information below reflects our perspective as of the recording date.
Quick summary: The Treasury has again increased its bond purchases, and this time the market reacted poorly, pushing yields to levels not seen since 2007. Below we explain what that signals, why forty years of falling rates left most investors with the wrong sense of "normal," and why portfolio structure matters more than any single announcement.
A few weeks ago we looked at a Treasury Department announcement about increased bond purchases and what it might signal. Since then the story has developed in a direction worth explaining — and it's opened up a bigger question about what "normal" interest rates actually are.
What's happened since the original announcement?
The Treasury initially announced it would double its bond purchases, and the bond market reacted positively. More recently it increased that figure again — and this time the market reacted poorly.
That reversal is the interesting part. The first increase was read as a signal of willingness to support the bond market. The second was apparently read as something closer to an admission of necessity. Bond yields are now at levels we haven't seen since 2007.
We'd note carefully that 2007 is not a comparison anyone makes lightly, and we are not predicting a repeat of what followed. But rising interest rates create real problems well beyond government financing. They raise borrowing costs for anyone taking out a mortgage or a business loan, and that flows through the broader economy.
Why don't these purchase amounts move the needle?
Because relative to the size of the bond market, they're small. The more significant detail is that the Treasury has indicated roughly $1 trillion available in its general account to purchase bonds if necessary.
That figure changes the conversation. Incremental increases are a signal. A trillion dollars is a capability. If the government moves from signaling toward explicitly defending an interest rate ceiling, the implications reach across asset classes — which is the thread we picked up in the earlier discussion.
Meanwhile, yields continuing to rise functions as a test of the Treasury's resolve. The market is effectively asking whether the stated willingness to buy is real.
Is the recent rise in rates normal or unusual?
This is where stepping back helps, because almost everyone's intuition about "normal" interest rates is built on an unrepresentative period.
From 1981 to 2021 — exactly forty years — bonds were in a sustained bull market. Rates fell from double digits at the start to near zero by the end. Parts of the world went further into negative territory, where investors effectively paid for the privilege of lending money. At the time it seemed remarkable, and in hindsight it looks stranger still.
If your entire adult financial life happened inside those forty years, falling rates feel like the default state of the world. They aren't. They were one very long chapter.
Rates bottomed in 2021, and for roughly five years since we've seen the reverse: investors accepting progressively lower prices for bonds, which mechanically pushes yields up. The causes are debated — inflation, supply and demand imbalances, several other factors — but the direction has been consistent.
Whether this becomes a genuine long-term bear market in bonds is not something we'd claim to know. But the evidence is accumulating, and if it is one, then governments and central banks worldwide will be grappling with sustained higher rates and limited good options.
Why can the Fed and the Treasury seem to work against each other?
Because they control different parts of the same curve, and they're solving for different problems.
Treasury operations discussed here involve longer-dated bonds — 20 to 30 years. The Federal Reserve controls short-term rates, which is what's meant when you hear the Fed is cutting or hiking. Two institutions, two ends of the yield curve.
That creates the possibility of genuine tension. If the Treasury is working to keep long rates contained while the Fed raises short rates to fight inflation, those forces pull in opposite directions. The Fed's primary inflation tool is raising rates to increase borrowing costs, which slows money movement and cools the economy — with unemployment as a typical side effect. It's a blunt instrument, deliberately so.
It's also worth being honest about the limits. Some of the most visible inflation — energy prices especially — responds to global supply conditions that monetary policy simply doesn't reach. Gas prices are the form of inflation people feel most directly, because you drive past the number several times a day, and they're driven substantially by factors outside any central bank's control.
What does a weaker dollar mean for investments?
If rates stay lower than inflation warrants, one likely consequence is dollar depreciation against other currencies. That matters because anything priced in dollars is affected by the dollar's direction.
When the dollar weakens, the dollar-denominated value of commodities, precious metals, and other hard assets tends to rise. That's not a forecast or a recommendation — it's a mechanical relationship worth understanding, because it explains why a decision about interest rates ripples into asset classes that seem unrelated at first glance.
So what should investors actually do about all of this?
Here's the honest answer: almost certainly nothing, and it's worth understanding why.
You will not remember any particular market day twenty years from now. It's easy to get caught up in the minutiae of financial news and what it means day to day — and yes, account values matter to people in real time. But what determines long-term outcomes are major trends and portfolio structure, not any single announcement or meeting.
Our approach is diversification across investments and across investment styles. That doesn't make a portfolio immune to a surprise policy decision, but it does provide meaningful shielding from any one of them.
The broader point is that uncertainty isn't a temporary condition to be waited out. It's a permanent feature, and it's built into the risk any investor accepts when they put money to work. Over long periods, that risk is typically what generates return. Our job is to take calculated risks — to hold investments that will fluctuate through exactly these periods — and to try to maximize return for the risk being assumed.
We prepare and react. We don't predict. That's been our approach through every environment, and it's why we'd rather clients feel confident in how a portfolio is built than anxious about how to position for the next headline.
If you have questions about how any of this relates to your own situation, we'd welcome the conversation.
Frequently Asked Questions
Why do bond prices fall when interest rates rise?
Bond prices and interest rates move in opposite directions because a bond pays a fixed stream of interest. If newly issued bonds start paying more, an existing bond paying less becomes less attractive, so its price has to fall until its effective yield is competitive. The reverse works the same way: when new bonds pay less, existing higher-paying bonds become more valuable. This is why "yields are rising" and "bond prices are falling" describe the same event.
Are bonds still worth holding when interest rates are rising?
Bonds serve a purpose in a portfolio beyond their price movement, which is why most long-term investors continue to hold them through rate cycles. Rising rates do pressure the market value of existing bonds, but they also mean newly purchased bonds pay more than they did before, so an investor reinvesting over time isn't purely disadvantaged. The more useful question is usually how much interest rate sensitivity a particular portfolio carries and whether that matches the investor's time horizon and need for stability — which is a conversation worth having with an advisor who can see your full situation.
How do rising interest rates affect people in or near retirement?
The effects run in both directions. Rising rates reduce the market value of bonds already held, which matters for anyone drawing income from a portfolio, since withdrawals during a decline sell assets at depressed prices. At the same time, higher rates mean newly purchased bonds and cash-equivalent instruments generate more income than they have in years, which can help an income plan. Rising rates also raise borrowing costs broadly, which can affect anyone carrying a mortgage or considering a move.
