Kudlow Clarifies: Rising Bond Yields Reflect Growth, Not Inflation

FOX Business host Larry Kudlow examines the implications of rising long‑term Treasury yields on his show “Kudlow.”

Let’s not panic over the rise in long‑term Treasury yields; the recent focus on the 30‑year bond has generated far more commentary than we’ve seen in a decade.

The bellwether 10‑year Treasury has traded steadily between 4% and 5%, attracting little alarm.

The crucial observation is that the 30‑year yield has risen roughly 35 basis points lately, driven almost entirely by fresh data pointing to stronger economic growth—particularly in manufacturing, construction, and advanced technology.

This increase is not inflation‑driven, yet many headlines have cried inflation without solid analysis, seemingly eager to criticize President Trump.

Examining any Treasury rate move shows the rise stems from the real yield, not the inflation component.

The inflation component—measured by the CPI breakeven—has remained flat all year, with the 30‑year breakeven staying just above 2.0%.

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For instance, the 10‑year Treasury rate has climbed roughly 50 basis points year‑to‑date.

Virtually the entire increase comes from a 50‑basis‑point rise in the real yield of TIPS, while the breakeven‑based inflation expectation has risen by less than 5 basis points.

The CPI breakeven component, which reflects inflation expectations, has remained essentially flat, a pattern that also holds for the 30‑year Treasury.

In fact, market rates are rising because of stronger‑than‑expected growth around 4%, signaling a normalization after the near‑zero rates of the financial crisis, the pandemic, and what some view as misguided Fed policy that Kevin Warsh aims to correct.

For perspective, a Treasury yield above 4% resembles the climate during the Clinton‑Gingrich era, when robust growth was bolstered by lower capital‑gains taxes and welfare reform.

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Back then the economy was booming, with Treasury rates near 6%; today we are simply normalizing amid a substantial expansion. President Trump highlighted this boom at the White House, referencing a major legislative package.

He declared, “We’ve achieved gains over the past 16 months that are almost unbelievable, and the United States is attracting more investment than any nation in history—trillions of dollars are flowing in.”

He added that U.S. economic dominance fuels trillions in investment, creates millions of jobs, and broadens access to credit and capital, giving every citizen a shot at the American dream.

The American dream remains alive and well. To sum up: ignore the sensational headlines, and recognize that bond‑market interest rates are not skyrocketing.

Any uptick we see stems from a stronger‑than‑expected economy, reflecting a normalization process; there is no cause for alarm, despite the press’s tendency to criticize President Trump on virtually every issue.

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