Yield moves signal growth optimism, not credibility concerns
An FT opinion argues that the rise in long-dated US Treasuries does not indicate worries about debt sustainability or Fed credibility. Inflation expectations remain anchored near the 2% target, while the real rate and term premium stay largely stable; higher yields mainly reflect higher expected long-run overnight rates. Investors are pricing in faster potential growth from AI, deregulation and tax policy, which could improve the fiscal path as revenues grow faster than outlays. Tariff revenue has been volatile, but as refunds fade and growth accelerates, deficits should decline, with easing energy shocks helping to bring inflation and rates down. The piece supports liquidity provision and regular, shorter-term debt issuance to maintain market stability while deficits shrink.