Bonds and interest rates seemed to top the headlines this week – and “rage” is the operative word. The question I keep getting is: “why are interest rates going up when inflation is high and affordability is a concern?” 

It’s a viable question. 
 
Managing the economy and interest rates is a bit more complex than meets the eye.
 
The Fed has two levers. Cut rates, and borrowing gets cheaper — more spending, but a risk of feeding inflation. Raise rates, and borrowing gets more painful — a higher car payment, a pricier mortgage refinance, a credit card balance that grows faster — right when people are already stretched.  Painful as it is – it does cool inflation down. 
 
But the Fed and inflation aren’t the only drivers in determining interest rates.
 
A bond is really just a loan — you lend money to whoever issued it, and they pay you back with interest. Right now, the line to borrow is long: Uncle Sam’s running big deficits, and Silicon Valley wants a fortune for data centers and chips. When everyone’s begging to borrow, lenders get to be choosy — and choosy lenders charge more! Just like demand can drive up the cost of eggs and concert tickets – it can also drive up interest rates.
 
The Treasury made a move this week to try to lower interest rates by buying back some of its older bonds. With fewer bonds up for sale, there’s less competing for buyers’ attention — which takes some heat off long-term rates. It’s also the government’s way of signaling it’s serious about keeping borrowing costs in check.
 
And in case you missed it: U.S. debt crossed $40 trillion this week. When the biggest borrower in the room owes that much, “rates should come down soon” is a tough sell.
 
None of this means panic — it means paying attention. If you’re wondering what this means for your bond holdings, cash, or an upcoming big purchase, let’s talk.
 
Invest well,
Barbara


August 23, 2026

Source:
https://www.nytimes.com/2026/08/20/business/treasury-bond-market-interventionist-tactics.

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