Join as a member—or become a founding member.

4 percent high and rising

In February, yields for Japanese bonds hit their highest rate since 2011. Yields for 10-year U.K. bonds were the highest they’d been since 2008; yields on their 30-year bonds were the highest since 1998. The British weekly The Economist said the global climb in bond yields “marks a profound shift from before and during the Covid-19 pandemic, when yields were heading to all-time lows.”

Adding to the mystery of this whole phenomenon is the fact that the U.S. Federal Reserve had been aggressively cutting interest rates since September, even if they’ve held firm in early 2025. The Fed’s interest rate is the benchmark rate for bank lending, and Fed rates and bond yields typically move in tandem, not away from one another. In the Financial Times, one columnist called this divergence “quite weird.”

Bond yields aren’t abstract financial statistics, either; they influence the costs of major purchases. They determine the interest rates for home mortgages and car loans. And rising bond yields have historically been followed by higher inflation, which would raise the prices of most goods and services. So what’s going on?

Rebecca Patterson is a senior fellow at the U.S. Council on Foreign Relations and an independent director at Vanguard, a global asset manager; she was previously chief investment strategist for Bridgewater Associates, the world’s largest hedge fund. Patterson says a number of factors are at work here. Investors were expecting higher growth, but lately, they’ve begun to fear higher inflation—and meanwhile, the supply of bonds keeps growing, forcing governments to offer higher yields to get investors to buy them.

That growing supply of government bonds in the world, Patterson says, is revealing a critical weakness in many countries’ financial health—and a potentially serious problem for the future of their public services. Countries are issuing more and more bonds because their governments keep running budget deficits—financed through the bonds—and their total public debts keep growing. But when governments have to spend more money every year paying off the interest on bonds, they have less to spend on public goods like health care, education, or defense, unless they just keep piling on more debt—which is, it turns out, the path most advanced countries are currently on …

• “Since December, bond investors have moved away from hopes for growth toward fears of inflation. They’re worried about tariffs causing inflation; they’re worried that there isn’t going to be the immediate deregulation they had hoped for. Investors are feeling a little more nervous and uncertain. U.S. bond yields continue to rise, but now stock prices have been falling—and that’s the scenario that hurts borrowers anywhere.”
• “In this moment, investors are worried that tariffs will mean higher prices or fewer goods; they’re worried that mass deportations will cause labor shortages, and so, wage increases—but without any growth. We’ve already seen some U.S. companies raising prices because they worry that retaliatory tariffs by foreign countries will affect them. The U.S. Federal Reserve and other central banks are carefully looking at inflation expectations. They might react quickly to market jitters by raising rates—or at least not cutting them—and that would push bond yields higher.”
• “Most countries are now offering a bigger supply of bonds to the market—because most countries are running bigger deficits and have higher debts. Governments need to borrow more money for the things they want to do, so they issue more bonds. The prices and yields of bonds, then, are just a basic case of supply and demand. When supply rises, it’s going to result in lower prices—and higher yields—unless you have an equal rise in demand. The bond supply is growing today, but it’s an open question whether there’ll be enough buyers.”

To mark its recent launch, we’re offering new members a month’s free trial to The Signal—if you sign up before the end of February.

But in recent years, as Branko Milanovic writes in Visions of Inequality: From the French Revolution to the End of the Cold War, inequality studies have “exploded.” Perhaps most famously, the 2014 English translation of Thomas Piketty’s Capital in the Twenty-First Century probably sold more copies in its first year than any other economics book ever. And it’s not just the study of income inequality that’s gained traction; the politics of it has gained traction also. Inequality has become the watchword of left-populist movements, like Jeremy Corbyn’s in the United Kingdom or Bernie Sanders’s in the United States. Why? This week, in the member’s dispatch, we take a look—at the question and Milanovic’s ambitious crack at answering it.

—Gustav Jönsson

• For the first time since 2015, South Korea’s birth numbers have increased, with a 3.6% rise reported in 2024. The country welcomed 238,300 babies last year, 8,300 more than in 2023, according to government statistics released on Wednesday. Officials attribute the development partly to post-pandemic marriage rebounds, as weddings that were postponed during COVID-19 are now on. South Korea’s fertility rate still remains the world’s lowest at 0.75 (far below the 2.1 needed for population stability). The number of deaths still significantly outpaced births, with 358,400 deaths recorded last year.
• Thieves in Toulouse, France used a stolen bank card to purchase a lottery ticket that won €500,000 (US$523,000). The victim, identified only as Jean-David E., discovered his backpack had been stolen from his car, containing his bank cards and documents. When he went to cancel the card, he learned two homeless men had already used it to buy a winning scratch-off ticket. Instead of simply pursuing legal action, Jean-David E. is offering to share the winnings if the thieves come forward. “Without them, no one would have won,” he said. As of Wednesday, the prize remained unclaimed.
• Colombian authorities arrested a 40-year-old man at Cartagena’s Rafael Núñez International Airport for attempting to smuggle cocaine under his toupee. Anti-narcotics officers identified the suspect through passenger profiling before he could board his flight to Amsterdam. On inspection, police officials discovered 19 capsules of cocaine weighing 220 grams (valued at around US$10,500) hidden beneath the wig. Officals are now referring to the smuggling technique as “Narcopeluca”—“Drugwig.”

• Finding sites and apps that can actually simplify your life and help you be more effective is a challenge. More than 55,000 subscribers count on Wonder Tools—a free, weekly email that catches you up in five minutes on what’s most useful, from new AI services to surprisingly simple productivity apps. Sign up here.

Please send questions or comments here.

Interested in getting your teams or students

access to The Signal? Please be in touch.

Find us on Linkedin and X.

Add us to your address book.

Unsubscribe here.

© 2025