Former CEA chair Jason Furman: Treasury can't change 'underlying fundamentals' of the curve

Summary

Jason Furman argues that the Treasury's plan to more than double long-end debt buybacks cannot change the fundamental drivers of interest rates. He sees persistent upward pressure on long-term rates from the AI investment boom and heavy government borrowing, with real rates rather than inflation expectations doing the work. He also downplays inflation-hedge fears and discusses Fed Chair Warsh's likely preference for less Fed market attention.

• Treasury buybacks can manage curve shape day to day but not underlying fundamentals.
• High interest rates are likely somewhere, probably everywhere, on the curve due to the AI boom and government borrowing.
• Bond vigilantes are not tamed by buybacks; intervention works until it doesn't.
• Shortening US debt duration increases interest-rate risk.
• Real rates, not rising inflation breakevens, are the main yield driver.
• AI and government capital demand crowd out residential construction and other investment.
• Furman sees Fed credibility as intact and has not raised his own inflation fears much.
• Fed Chair Warsh is expected to prefer less Fed market attention.