Are we watching the U.S. go bankrupt?

Noah Smith · Noahpinion · August 22, 2026 at 01:47 · ⏱ 4 min read  | Read on Substack ↗
Summary
The U.S. is not going bankrupt yet, and the recent rise in long-term Treasury yields is small relative to the 2021-2023 surge, so it is not itself evidence of a bond-market collapse. The Treasury's one-day buyback intervention shows fiscal fragility, and if deficits and policies remain irresponsible, long-term rates and default/inflation risk deserve continued monitoring.
  • The 30-year Treasury yield jumped 6 basis points recently, and after Treasury Secretary Bessent's buyback announcement it rose over 7 basis points back to as much as 5.27%.
  • The government's bond-market intervention to buy long-term U.S. Treasuries pushed prices up for only one day before the bond market reversed.
  • Most of the global rise in long-term rates occurred in 2021-2023, not in 2026; Japan was the exception to that pattern.
  • U.S. long-term rates fell in 2019, bottomed during the pandemic, then had a large sustained rise in 2022-2023; the 2026 move has been only a few tenths of a percent.
  • John Cochrane is cited warning that unsustainable fiscal policies eventually lead investors to expect default, inflation, expropriation, or capital controls, with a shift to short-maturity bonds as a classic warning symptom.
  • The author argues the 2026 wiggle is too small to prove a bond-market collapse, but says U.S. debt levels and policies still bear close watching.
Read time 4 min
Length 4,659 chars
Category macro
Ideas
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The article reports the 30-year Treasury yield rising to 5.27% and shows the administration's buyback intervention only held for a day, while warning that excessive borrowing and bond-vigilante risk a
The article reports the 30-year Treasury yield rising to 5.27% and shows the administration's buyback intervention only held for a day, while warning that excessive borrowing and bond-vigilante risk are reasons for concern; TLT is the standard proxy for long-duration U.S. Treasuries exposed to these yield moves. Risk: The author also stresses the 2026 rise is small versus 2021-2023 and that a true sovereign debt crisis has not begun, so long-end yields could stabilize if fiscal fears fade.
Noah Smith Economist; ex-columnist, Bloomberg Opinion
Cochrane's quoted framework says investors seeing trouble 'look to the comfort of short term bonds' and that 'moving to short maturity structures is a classic symptom of trouble ahead'; this implies s
Cochrane's quoted framework says investors seeing trouble 'look to the comfort of short term bonds' and that 'moving to short maturity structures is a classic symptom of trouble ahead'; this implies short-duration Treasuries are relatively safer if long-term fiscal confidence erodes. Risk: If the bond market stabilizes and the Fed cuts rates, short-term yields may fall, reducing the relative appeal of cash-like Treasury exposure.
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