Oct 5, 2026 · 59 min
Treasuries lose their safe-haven status
Why Treasuries Became Risky Again
Rising yields and weaker stock-bond diversification could reshape how investors assess US debt, monetary policy, and American financial power.
- 1Pandemic-era Fed communication flattened markets’ perceived policy reaction function as inflation accelerated.
- 2Treasuries increasingly demand compensation for inflation, real-rate, and recession risks rather than reliably hedging equities.
- 3Changing debt buyers, persistent deficits, and deep bond markets connect Treasury pricing to US geopolitical influence.
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Carolin Pflueger connects Treasury safety to the credibility of monetary policy and the broader geopolitical power of deep bond markets.
The brief
Long-term Treasury yields have risen as bonds lose their traditional role as stock-market hedges, raising questions about inflation, deficits, and US financial power.
Economist Carolin Pflueger explains how markets infer the Fed’s policy reaction function—and how unusually clear pandemic-era guidance shaped those expectations.
The central tension is whether higher yields reflect greater Treasury supply or greater compensation for inflation, real-rate, and recession risks.
Pflueger argues that bonds may regain their hedging role through luck or better monetary policy, but stable inflation expectations have not prevented rising volatility.
The conversation links deep Treasury markets to war financing, national credit, and financial hegemony, asking whether market leadership can shift independently of military power.
The episode’s sharpest insight is that safe-haven status is not intrinsic: it depends on policy credibility, investor expectations, and the structure of economic shocks.
Featuring
Carolin PfluegerMentioned
University of Chicago Harris School of Public Policy
Kevin Maxwell Warsh
United KingdomListen to the full episode and explore every guest, topic, and moment on PodLume.