Introduction
In this episode of Thematic Edge, Marvin Barth and Mark Farrington reunite to examine what is really driving the rise in sovereign bond yields around the world. Their central argument is that the move is bigger than fiscal policy or any single government: capital is becoming more expensive as investment demand rises, global savings come under pressure and central banks struggle to rebuild credibility.
The conversation moves from Kevin Warsh’s first months at the Federal Reserve and the bond market response to the Iran war, to Treasury buybacks, FX intervention and the structural effects of Localization. Looking ahead, they map out what Mark calls the “mother of all resolution windows”, spanning the September Fed and Bank of Japan meetings, the Trump Xi summit, Q3 earnings, and the US midterm elections. They finish with the market implications, including why the yen may offer one of the clearest ways to trade the path to resolution.
Key themes
* Competition for capital: Rising investment demand, from Localization, defence spending, energy infrastructure, and AI datacenters, is colliding with pressure on global savings. The result is structurally higher real yields and steeper sovereign yield curves.
* Fed credibility: Kevin Warsh’s first months as Chair have left bond markets in “trust but verify” mode. The September meeting now poses a difficult test as softer inflation data collides with the Fed’s need to restore credibility.
* Looking through shocks: The Iran war demonstrated why central banks can no longer assume markets will simply look through supply shocks. With credibility already depleted, geopolitical shocks are feeding more directly into inflation and term premia.
* Bond market intervention: Treasury buybacks and currency intervention are examined as tools for improving liquidity and influencing market behaviour, rather than evidence of covert QE or an impending Treasury market crisis.
* The mother of all resolution windows: The Fed and BOJ meetings, the Trump Xi summit, Q3 earnings, and the US midterms create a sequence of events that will determine the ultimate direction for the dollar, equities and global rates.
* Equities compete for savings too: Strong US returns to capital continue to attract global savings, while growing corporate debt issuance places companies in more direct competition with sovereign borrowers for capital.
* The yen reversal: A more hawkish BOJ and movement towards neutral rates could finally break the yen carry trade, creating the conditions for a sharper fall in dollar-yen and potentially more supportive conditions for Japanese assets.
Episode recorded: 8 September 2025
Timestamps
00:00 Introduction: Why global yields are rising
02:30 Marking Kevin Warsh and the Fed to market
04:04 The Treasury sell off and steepening yield curve
07:20 Bond markets move to “trust but verify”
11:30 Why the September Fed meeting matters
20:09 Central bank credibility and the Iran shock
22:11 The structural competition for capital
23:40 Localization, investment and higher real yields
26:53 Treasury buybacks and yen intervention
30:47 Why higher yields do not necessarily signal crisis
35:24 The “mother of all resolution windows”
38:11 US earnings, equities and the dollar
40:48 CPI and the September Fed decision
42:36 Why equities also compete for global savings
43:45 What to expect from the Trump Xi summit
46:34 Is the Fed becoming untradeable?
50:51 The case for a yen reversal
54:57 Japan, capital flows and positive contagion
56:39 Europe and the US election: what comes next
Further Reading
* Observations: Marking to market, Thematic Markets, 8 September 2026
* The velvet glove, Thematic Markets, 20 June 2026
* Themistocles’ lesson for the Fed, Thematic Markets, 8 May 2026
* Alea iacta est, Thematic Markets, 23 March 2026
* What debasement? (Debasement Part II), Thematic Markets, 8 March 2026
* May you live in interesting times, The Devil, Thematic Markets, 5 January 2024
* The Politics of Rage, Barclays 2016
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