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September 19, 2026

Good morning. Andrew here. Bond yields continue to climb, driving up borrowing costs everywhere — from mortgages and credit cards. What’s actually driving the increase? DealBook contributor Peter Coy breaks it down. Also: Nitin Nohria, a former dean of Harvard Business School and the executive chairman at Josh Kushner’s Thrive Capital, talks with DealBook’s Sarah Kessler about the real role of a C.E.O. Finally, don’t miss this week’s news quiz. Spoiler: It’s about AI. (Was this newsletter forwarded to you? Sign up here.)

President Donald Trump speaks with the Federal Reserve Chair Kevin Warsh on the day of his swearing in ceremony in May. Evelyn Hockstein/Reuters

Why are yields so high?

It cannot have been easy for Kevin Warsh to come out for raising interest rates. The man who appointed him chairman of the Federal Reserve this year, President Trump, has been vocal in saying he thinks rates should be much lower. But with inflation persistently above target and bond investors restless, Warsh didn’t have a choice.

The rate-setting Federal Open Market Committee, which Warsh heads, voted unanimously on Wednesday to raise the central bank’s key short-term lending rate.

The yield on 10-year Treasury notes hit 5 percent before the Fed vote, the highest level since 2007, and has stayed around that level since, keeping borrowing costs high for home buyers and others. It’s not clear how much raising short-term interest rates will pull down long-term rates.

That’s because there are too many explanations floating around for why bond yields have risen so much. If you can’t pin down why something’s happening, you don’t have much hope of fixing it. Economists would say the rise in yields is “overdetermined.”

Here are 10 explanations from politicians, economists and others. Some of these would be mitigated by Fed rate increases, and some that would require something that changes in interest rates can’t supply.

Strong economy

The unemployment rate in August was just 4.1 percent, well below the 50-year average of 5.7 percent. A strong economy usually makes rates go up. But that’s not how Trump sees it. After the Fed vote, he wrote Wednesday on Truth Social that interest rates should be 1 percent or less because the U.S. economy is strong, with “booming investment.”

Trump’s logic is weak on two counts. First, contrary to Trump’s claim that “we are the Best Credit in the World,” some foreign investors are getting nervous about putting money into the United States because of his hostile behavior, as The Times reported this week. Second, “booming” is not consistent with cutting rates. It takes higher rates to attract the additional funds needed for investment. Plus, fast growth makes people feel richer and less inclined to save, so rates have to be more attractive.

Oil

Treasury Secretary Scott Bessent told Steve Bannon this month that interest rates have been moving in close sync with oil prices. He predicted that oil could fall to $40 or $50 a barrel when the war with Iran ends, and that would help lower interest rates. But even if oil and rates do remain in sync, which isn’t clear, oil prices that low seem a long way off. The war with Iran has heated up lately, and now the Houthis are pressuring oil flows through the Red Sea.

Dealers

Another flattering explanation for high rates is that there’s plenty of demand for Treasury debt in the broad market — it’s just that the primary dealers who buy it from the Treasury and then resell it have become a temporary choke point, unable to handle the high volume of issuance.

Darrell Duffie of Stanford’s Graduate School of Business, a luminary of finance, has cited primary dealers as a choke point in the past, but he wrote in an email that of the measures of dysfunction that he looks at, “none are flashing red.” Auctions are actually going smoothly, albeit at higher interest rates, measured by the stable ratio of bids to amounts for sale (known as the bid-to-cover ratio).

Uncertainty

OK, then, how about uncertainty as an explanation for higher yields? Long-term interest rates include what’s called a term premium, which is compensation for the risk that things won’t go as expected and the bond you bought will be worth less than you anticipated.

Goldman Sachs analysts wrote in late August that the term premium for bearing uncertainty is “high and sticky.” On the other hand, Torsten Slok, the chief economist at Apollo Global Management, an asset manager, cites data from the Federal Reserve Bank of New York to say that the term premium is well below its levels of the early 2010s and has moved “sideways” over the past year. Let’s call that a draw for now.

Inflation

Inflation seems like a prime suspect in the interest-rate rise. Surprisingly, though, inflation expectations haven’t actually risen much. Judging from yields on inflation-protected securities, professional investors are expecting inflation to average 2 percent over the next decade, up from last year but the same as they expected two years ago. Consumers haven’t freaked out, either. According to a University of Michigan survey, they expect inflation over the next five years to average 3.4 percent. That’s actually lower than they expected a year ago, 3.7 percent.

The Fed

What has changed decisively is the Federal Reserve, which has switched over the past year from cutting interest rates to raising them. “We have never seen such a dramatic re-pricing of the Fed,” Slok said in an interview.

Fed officials feel that their credibility will be eroded if they can’t get inflation down to their target of 2 percent a year despite years of promises to do so. Prices by the Fed’s preferred measure rose 3.7 percent in July from a year earlier. “The plain fact is that inflation is too high,” Warsh told reporters after the rate-setting meeting Wednesday.

When the Fed begins to raise rates, it doesn’t tend to roll them back soon. The median forecast by Fed officials is for one more quarter-point increase before the hiking stops.

Budget deficits

This is a biggie. The federal budget deficit is nearly 6 percent of gross domestic product, which is unusually high for a period of healthy economic growth, yet neither Democrats nor Republicans have seized on deficit reduction as a flagship issue in the midterm elections. The Treasury has to pay higher rates to get investors to buy all the bonds hitting the market.

Artificial intelligence

On top of government borrowing, there’s a surge of corporate borrowing to finance massive investments in data centers, power plants, and other facilities for artificial intelligence. The tech giants used to be a force for lower Treasury rates because they put their abundant excess cash into government securities. Now they’re a force for higher Treasury rates because their excess cash is more than used up; they’re competing with the government for investors’ funds.

Global forces

This isn’t just a U.S. phenomenon. The demand for loans has risen worldwide, and so have interest rates. Investors have choices of where to put their money, so when rates rise in one country — say, Japan — they must rise in others as well.

Bessent tried to fight back against these powerful global forces by increasing the Treasury Department’s repurchases of long-term bonds, hoping to drive their yields lower, but the size of the buyback this month — $5.19 billion — was far too small to make a difference.

Bessent’s gambit may even have pushed rates higher. His market intervention “drove up yields because it validated investors’ fears that there’s not a fix to the deficit problem,” Hardika Singh, an economic strategist at Fundstrat, an independent investment research firm, wrote in an email. “He brought a squirt gun to a three-alarm fire and told everyone he had it under control,” Tim Mahedy, chief economist of the Macro/Access consultancy, wrote in an email.

Loose anchor

Although Slok says that uncertainty hasn’t increased, other economists insist that it has. The problem is that the compensation for uncertainty, namely the term premium, can’t be directly observed, only inferred. Kristin Forbes, an economist at Massachusetts Institute of Technology who served on the Bank of England’s Monetary Policy Committee, said in an interview that she has “seen credible people say that the term premium is increasing.”

What’s more, inflationary shocks to the system have become more dangerous in recent years, Forbes said. A decade ago, central banks could mostly ignore inflationary spikes caused by external forces, such as blips in oil prices, in the confidence that consumers and businesses would shrug them off and remain anchored to low-inflation expectations, she said.

Now, though, she said, inflation has been above the Fed’s target for so long that a jump in inflation now risks becoming embedded in people’s expectations. Plus, she said, more of the shocks to the system lately have been from global forces, which tend to last longer and be harder to fight.

Figuring out which of these explanations for higher rates matter most, and which don’t matter all, is important to policymakers. Think of a car that won’t start. The battery might be dead, or the starter motor might be broken, or the tank might be empty, and you don’t know which it is. That’s the situation in the bond market right now. Fixing any given problem won’t buy relief if it happens to be the wrong problem.

Right now, with so many independently sufficient causes for high rates in play, it’s fair to say markets have both problems at once: worse news, and less certainty about how much worse it can get.

IN CASE YOU MISSED IT

A.I. safety moved to the center of the national agenda. Anthropic C.E.O. Dario Amodei ignited a new round of debate on the risks of A.I. with a 3,800-word essay that called for a slowdown in development of the technology. Prominent chief executives of A.I. companies, including OpenAI’s Sam Altman, Elon Musk, and Google DeepMind’s Demis Hassabis supported some of his recommendations, while Nvidia’s Jensen Huang criticized the conclusion. President Trump dismissed the worries over safety as a “hoax.”

Congress delivered a major blow to the crypto industry. The Senate voted to block the advancement of the Clarity Act, a sweeping bill shaped by crypto executives that would create new rules for the industry. Democrats wanted stronger language to prevent public officials, including President Trump, who backed the bill, from using crypto to make money.

Warren Buffett stepped down as chairman of Berkshire Hathaway. The 96-year-old will remain on the board as chairman emeritus and named his son, Howard G. Buffett, to succeed him as chairman. Greg Abel, Warren Buffett’s longtime lieutenant, took over as C.E.O. last year.

More big deals: OpenAI is considering new financing at a $1.5 trillion valuation. The S.E.C. cleared the way for tokenized stock trading. And the Congressional Budget Office estimated the Iran war has cost the United States $38 billion.

What does a C.E.O. actually do?

For almost 30 years, Nitin Nohria has taught and overseen a workshop at Harvard Business School for newly appointed C.E.O.s of companies with at least $1 billion in revenue. For 10 of those years, he was dean of Harvard Business School, and now he’s a partner and executive chairman at Thrive Capital, the venture firm run by Josh Kushner.

In all of those capacities, he’s been an adviser to the top leaders at enormous companies, with a front seat to the challenges and opportunities of running firms in a wide range of industries (the Endeavor co-founder Ari Emanuel writes glowingly in his new memoir about seeking Nohria’s advice).

Nohria talked with DealBook’s Sarah Kessler about his upcoming book, “The CEO: The Role, The Reality, The Responsibility,” in which he writes about what C.E.O.s actually do, and how they can do it well. The interview has been condensed and edited.

You and a colleague tracked the time of more than 30 C.E.O.s for three months, with their assistants coding every day in 15 minute increments. What did the C.E.O.s learn?

Two things were almost always surprising to C.E.O.s. One was, “I didn’t realize I spent more time with consultants and bankers than I spent with my customers." And the other one was they spent less time with frontline employees than they imagined.

What derails C.E.O.s?

The job has so many perils, from inflating your ego to losing your grounding to feeling like you have to make the grand gesture — you know, I’m going to do the mother of all acquisitions.

You’ve advocated for an equivalent of the Hippocratic oath for business leaders. Why?

It was grounded in the history of why business education emerged in the first place: The idea was to create a profession in the same order as law or medicine.

The thinking was, we should choose people to manage companies who have mastered a body of knowledge. But also a moral understanding that they have a fiduciary obligation of sorts to society and to their companies.

Where does fiduciary obligation to society begin and end?

Not everywhere in the world do companies have the freedom that companies enjoy in the U.S. And that freedom is earned.

They derive resources from society and in return have to create value for society. I’ve always thought that C.E.O.s need to understand their companies as instruments that contribute to society. And, of course, a profitable company is the only way to build an enduring company.

Thrive is an investor in OpenAI. What are the moral responsibilities of A.I. companies?

It is important to harness the technology to the fullest because if you don’t, you’re just going to fall behind. At the same time, you also have to be mindful of issues like safety and security.

What does it mean to manage those issues well?

You see these moments in every technology, whether it was electricity or automobiles or airlines where at some point the industry had to come together to find a way to say how to embrace safety. We had to create safety standards that actually made the technology more widespread — but the early days are always a little wild and unruly, and that’s how technology unfolds.

The Anthropic chief executive Dario Amodei recently called for a slowdown of A.I. development. Carlos Barria/Reuters

Reining in A.I.

This question comes from a recent article in The Times. Click an answer to see if you’re right. (The link will be free.)

Despite alarming discussions about the potential risk for artificial intelligence to result in mass job loss and human extinction, there are essentially no federal laws on the technology. But that’s not for a lack of ideas.

Which of these ideas for reining in A.I. has not been proposed by a member of Congress?

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Michael J. de la Merced, Reporter, London @m_delamerced

Niko Gallogly, Reporter, New York @nikogallogly

Lauren Hirsch, Reporter, New York @LaurenSHirsch

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