Capital Ideas podcast Bond talk: Which way interest rates?
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Sep 10, 2026 
John Queen, a fixed-income portfolio manager and investment officer, explores the bond market’s new normal. He discusses persistent inflation, historically typical real rates, rising Treasury yields and the Fed’s next move. The conversation also covers U.S. debt risks, corporate and structured credit, AI-driven growth, and why bonds may be attractive again for balanced portfolios.
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Higher Real Rates May Be Normal Again
- Real 10-year rates historically stayed near 2%–3%, unlike the 0%–1% range investors experienced after the financial crisis.
- Nominal yields around 4%–5% can support healthy economic activity once businesses adjust their return expectations.
The Bond Yield Prediction That Aged Well
- In 1994, a portfolio manager warned that a 5.75% long-bond yield might never be seen again below that level.
- The story shows why investors should not assume yields must revert to recently familiar levels.
Why Higher Yields Do Not Mean Panic
- Higher Treasury yields do not necessarily signal imminent Fed hikes; they can reflect a normal upward-sloping curve and roughly 2.5% inflation.
- Markets appear to accept that the Fed may tolerate inflation above its 2% target.