Prof G Markets · Sep 24, 2026 · 19m · 9m saved
With Howard Marks, Co-Founder and Co-Chairman of Oaktree Capital Management
The 10-year Treasury yield had just broken above 5.1%, a 19-year high, when Howard Marks came on Prof G Markets. His view was that interest rates are still low.
Much of the market is treating the bond selloff as an emergency, and the Treasury has been buying back long-dated bonds to push yields down. Marks said a 30-year bond at 5.3% or 5.4% only looks high against recent history, and that the recent history is the aberration.
"I've been around this thing since the 60s and today's interest rates look low to me, not high."
Howard Marks, co-founder and co-chairman of Oaktree Capital Management, on Prof G Markets with Ed Elson, discussing his new memo to clients on the Treasury's attempts to hold down long-term yields. Elson said the memo calls the Treasury's response a cosmetic fix for a situation that is structurally unsound.
The full segment is covered here so you can skip it. 19 minutes of audio, 9 minutes of reading.
Here are the 8 arguments that matter.
Key Takeaways
Three forces are pushing yields up: inflation stuck above the Fed's 2% target, a deficit near $2 trillion, and heavy demand for capital, including from AI
Running a $2 trillion deficit in a time of prosperity is what has changed, in his view
A failed Treasury auction is unlikely; steadily rising rates are the more likely consequence
Today's rates are not high by history, since the fed funds rate was zero for most of 2009 to 2021
Rates probably will not fall much in the next year or two, and investors have been counting on declines
Selling US assets over the deficit makes some sense, but he would do very little of it
The $40 trillion debt changed the conversation more than $39 trillion did
1. Three Reasons Yields Rise
Ed Elson opened with the market: the 10-year yield above 5.1%, a 19-year high; the 30-year back to levels last seen in 2004 and close to 5.4%; and the 5-year above 5%. He said Treasury Secretary Scott Bessent had bought back $6 billion of long-dated bonds weeks earlier, with a second $6 billion operation set for that day, and yields had still gone up. He asked what the bond market is saying.
The market acts, it does not explain
"The market doesn't tell you what it's saying." — Howard Marks
Marks said investors can only infer causes from what is happening around them. Outside of government action, rising rates mean people want more yield from an investment, for one of three reasons. They expect their money to buy less when it is paid back in 30 years, so they want an inflation premium. They think the loan has become riskier. Or there is so much demand for capital that each use has to pay more to attract it.
His three candidates
The first is inflation that has stayed above the Fed's 2% target for about five years. It came down from 9.5% to about 2.7%, he said, but the Fed could never get it to 2%. That is the main reason people want inflation protection when they lend for a long time.
The second is the debt. The US came out with a figure of $40 trillion for its national debt, and he called the spending that produced it profligacy.
"Why are we spending $2 trillion a year more than we're taking in taxes?" — Howard Marks
He compared the US to a brother-in-law who spends more than his salary every month and puts it on a credit card.
The third is strong demand for capital. On top of financing normal economic growth, the US has to finance a deficit approaching $2 trillion, while AI is drawing maybe hundreds of billions of dollars from investors in the debt market and competing with the Treasury for money. Other people may have different explanations, he said, and there is no way to investigate which is right.
