Collin Martin, head of fixed income research and strategy at Charles Schwab, joins David Lin on the afternoon of a sharp selloff to work through Fed Chair Kevin Warsh's Jackson Hole speech and what it does to the rate path. The conversation covers Schwab's hold call and why the firm calls it low conviction, the mechanics of the Treasury's bond buybacks, whether $4 billion an operation can hold long-term yields down, corporate credit spreads close to their all-time lows, the surge in hyperscaler debt, the case for inflation-protected Treasuries, and what higher long-term yields do to an ordinary household.
Guest: Collin Martin, head of fixed income research and strategy at Charles Schwab
Host: David Lin
Published: 29 August 2026 on The David Lin Report feed
Watch on YouTube | Apple Podcasts | 31 min
✅ Time saved: 16 min
Key Takeaways
Warsh's Jackson Hole speech was more hawkish than the desk expected
He argued inflation is still too high, citing the share of PCE sub-indexes running above 3%
Mr. Martin's worry is not the speech but the position it leaves the chair in
Schwab still expects a hold, and still calls it a low-conviction call
One more inflation print lands before September, and a hot August CPI could move the needle
Political pressure on the chair is real, and Mr. Martin does not think it decides the next move
Long-term yields rose because any hikes would be fine-tuning rather than real restriction
With the fed funds rate at 3.5% to 3.75% and a resilient economy, an upward-sloping yield curve is what you get
The Treasury's bigger buybacks are too small to change anything
$4 billion an operation against $32 trillion of marketable debt
The 30-year yield moved about 10 basis points, from 5.3% to nearer 5.2%
Schwab's range for the 10-year is 4.25% to 4.75%, with 5% as the ceiling
Corporate spreads are close to their all-time lows and he is still comfortable owning credit
The Bloomberg corporate bond index averages about 80 basis points, well below its long-term average
Investment grade yields 5% or more; high yield seven to seven and a half percent
Tech issuance has flipped the spread relationship the market was used to
Hyperscaler debt went from about $30 billion in 2020 to more than $200 billion this year through August
Inflation-protected Treasuries are serially underowned, at a real yield of 2.25% to 2.5%
The rise in long-term yields is about growth first, inflation second and deficits third
A Selloff That Started at 10 a.m. Eastern
The show opens on the market, not the guest. "It's a market bloodbath today on Friday, August 28th," Lin said, with stocks, gold and Bitcoin selling off at pretty much exactly 10:00 a.m. Eastern
Gold down 3.5% intraday, Bitcoin down 3%, the S&P 500 and the Nasdaq both lower
The 10-year and 30-year Treasury yields both up
The cause was Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium, and the question Mr. Lin set up was what in it spooked markets
The show's own prediction-market data framed the stakes before the interview began: traders put a 69% chance on the next rate hike arriving before 2027, and a 77% chance on it arriving before July 2027
Warsh Was More Hawkish Than Expected, and It May Have Boxed Him In
The host's setup: Warsh said the summer's PCE and CPI readings were better than expected, made a number of announcements and spoke at length about governance at the Federal Reserve, but it was his language on inflation that pushed markets toward pricing a September hike
The speech landed harder than the desk expected: "his speech was a little bit more hawkish than I think a lot were expecting, including myself"
What Mr. Martin wanted from it was not a policy signal but a read on how the new chair sees the economy, the labor market and inflation, and he says Warsh finally gave that
The inflation case, as Mr. Martin relayed it: "But to your point, he made it pretty clear that inflation is high right now. It's been high for 65 months."
Warsh also tied the 2021 and 2022 surge in part to the Fed's own communications and forward guidance
He cited the share of sub-indexes in the PCE reports running above 3%, setting 2026 against both recent history and the past few decades
Warsh took little solace from the June and July readings, and that is where the hawkish tilt came from
The risk is not the hike, it is the corner it puts the chair in: "I do worry a little bit that maybe it boxes him in because he was clearly hawkish here."
He still does not expect a move in September. The Fed held in June and July, and since then the labor market data has been weaker and the inflation data, in his word, encouraging. Unless inflation really picks up, "it'd be kind of a surprise if they were to hike in September"
Schwab's Call Is Still a Hold, and Still Low Conviction
The host read Schwab's published view back to him: the firm expects the Fed to remain on hold for now, and describes it as a low-conviction call. Nothing in the speech changed it
"Yeah, keyword: for now."
A handful of committee members have voted to hold and are very aware of how high inflation is. "I think they're looking for that reason to get off the hold seat and move to the hike seat"
Voters have already dissented, and non-voters such as Jeffrey Schmid favor hikes now
They have not been given that specific reason yet
One more inflation print arrives before the September meeting, and "If CPI for August comes in a little bit hot, that might be enough to move the needle"
As of the end of August the view is unchanged: the Fed can stay on hold unless it gets a positive surprise, meaning a stronger labor market or higher-than-expected inflation
Political Pressure Is Real, and He Doesn't Think It Decides This
The host showed a second prediction market, on whether President Trump will publicly criticize Warsh, priced at a 26% chance before January 2027, and asked whether pressure of the kind applied to Jerome Powell will shape rate decisions. Mr. Martin called it a great graphic
So far, he said, Mr. Trump has stood by Warsh and has made clear he is letting him be independent
On whether the pressure exists at all: "Is there political pressure? I think there is. You know, I think it'd be silly to assume there isn't."
The two are in touch regularly, which he says is fine and appropriate between a president and the chair of the Federal Reserve Board of Governors
The same pressure was there when Mr. Powell held the job
"I think he is going to follow his own sort of compass, but I'm not sure that he actually wants to hike despite the more hawkish tilt that we got this morning."
He reads Warsh as still more inclined to hold, consistent with the views the chair has aired over the past year to eighteen months
Why Long-Term Yields Rose on a Speech That Should Have Pulled Them Down
The host laid out the puzzle. A couple of weeks ago markets were reacting to the possibility of no September hike, and long-term yields went up anyway: "The bond vigilantes, you recall, took matters into their own hands and basically pressured Kevin Warsh to do something." Now the market prices a hike, and yields went up again. Mr. Martin's answer was that the short-term move is straightforward and the long-term move is telling you what kind of hike this would be.
Warsh does not want his language called forward guidance, or a reaction function, but everything he said suggested hikes might be necessary, and the 2-year Treasury yield was not positioned for a view that clear
A hike cycle meant to slow inflation, with the slower economy and weaker labor market that usually come with it, would normally pull long-term yields down. That did not happen with the 10-year
The reason he gives is that this would not be a real tightening: "I think it's because any potential rate hikes are less about real restriction and more about fine-tuning"
With the fed funds rate at 3.5% to 3.75%, at or near neutral with upside, and an economy that has been resilient for years, an upward-sloping yield curve is the shape you should expect, unless Warsh and the Fed set out to really slow things down
"a positively sloped yield curve makes sense and higher long-term yields are likely here to stay"
He does not see the current 10-year or 30-year yield as a problem that needs fixing, and notes that Treasury Secretary Scott Bessent is watching the 30-year
What a Treasury Buyback Operation Actually Does
The host asked for the mechanics in layman's terms. He set it up by saying the Treasury has drawn a line in the sand at just under 5% on the 10-year as the level at which it intervenes, and that Mr. Bessent announced on August 19th that the buyback program would double from $2 billion to $4 billion per operation.
The tool is older than the current argument about it, and its original purpose was liquidity. As a Treasury note or bond ages away from its issue date it becomes less liquid, because primary dealers and investors prefer the most recently issued bond. The Treasury buys the older paper off a dealer's books, and generally funds the purchases with Treasury bills
It buys back short-term securities as well as long-term ones, and the program was introduced under Janet Yellen rather than invented by Mr. Bessent
What has changed is the purpose, not the tool: lately the move looks less about liquidity and more about trying to prevent long-term yields from rising much further
The mechanics of the increase: there are two long-dated buckets, 10-to-20-year and 20-to-30-year, each upsized from $2 billion an operation to at least $4 billion. Mr. Bessent framed $4 billion as a floor rather than a ceiling. The operations are not regular and not always weekly
He says the Treasury Secretary is entitled to do this: "just like you and I, David, might refinance a mortgage or find more attractive borrowing opportunities elsewhere"
The size is what undercuts it. Set against the market it is aimed at, "we're at 32 trillion marketable, 40 trillion total. That's not really going to move the needle."
The real risk is how it reads: "if the markets think that, hey, he's trying to do something too funky as opposed to our government trying to solve the problem, it could potentially backfire over time"
The other levers in the same family are the Treasury General Account and the size of coupon auctions
$4 Billion an Operation Against $40 Trillion of Debt
The host pressed the arithmetic: Mr. Bessent has signaled the entire Treasury General Account may be available, with up to $1 trillion in it, against $40 trillion of US public debt of which roughly 20% to 25% is Treasury bills. What is $4 billion an operation going to do?
"Yeah. Yeah. Not much."
It has done something over the short run. The 30-year yield touched 5.3% and now sits closer to 5.2%, 10 basis points lower, which still weighs on interest expense as the government issues 30-year bonds
"I just don't know if this is a problem that needed to be fixed"
High borrowing costs are a negative for the budget, and interest expense keeps rising on a growing debt load
But nominal growth is very strong, the fed funds rate is at or maybe below neutral over the short run, corporations are posting record earnings, the labor market is stable and consumers keep spending
On that reading the yield level is the payoff rather than the problem: an investor should be paid more to hold a 10- or 30-year Treasury than to hold bills or to sit at the fed funds rate
Short-Term Yields Do the Moving, and 5% Caps the 10-Year
Asked whether intervention flattens the curve, he said maybe a little: "it might be more of a bear flattening, which is what we're seeing today, as opposed to a bull flattening" — meaning short-term yields rising on the hawkish speech rather than long-term yields falling
He does not expect a parallel shift up across maturities if the Fed hikes
Schwab's range for the 10-year Treasury is 4.25% to 4.75%, and it is sitting at the high end of that range now
5% is probably the cap. He calls it a psychological level at which investors start to see a lot more value, which puts a ceiling on the yield
Corporate Spreads Are Close to Record Lows, and He's Still Comfortable
The host asked him to confirm Warsh's claim that corporate credit spreads sit near the low ends of their historical ranges. He confirmed it: "Not at all-time lows, but near their all-time tights."
Investors are what set credit spreads, in his framing — the extra yield they demand to lend to a company — so tight spreads are a statement about investor psychology as much as about corporate health
The investment-grade number: the average spread on the Bloomberg corporate bond index is around 80 basis points, well below its long-term average, which tells him investors are comfortable with the corporate landscape
Corporate revenues and profits are growing, earnings are meeting high expectations and profit margins are very high, so companies are generally in shape to carry their debt loads
The risk he names is tech. Big technology issuers historically carried higher average credit ratings, more single A and double A, against a broad index weighted toward single A and triple B — the lower two rungs
Technology used to trade at tighter spreads than the index; that is flipping as new issuance surges, which he calls a supply and demand play
Investors are saying "Hold on, I might want a little bit more spread to compensate me for these risks."
The specific worry is how long the debt runs: "I don't know what the return expectations on these big AI buildouts are going to be over the next 10, 20 or 30 years"
Even with spreads tight, he is comfortable with investors owning some credit, investment grade or high yield, because the broad economic backdrop is still favorable
The Allocation Hasn't Changed, and One Federal Reserve Series Is Why
Asked whether the Treasury's interventions since the start of August changed Schwab's fixed income allocation, he said no. The firm has had a more favorable view on credit, both investment grade and high yield, for a few months
Earnings matter more to a shareholder than to a bondholder. If earnings grow 20% against an expected 25%, the stock may be disappointed, but the issuer stays current on its debts, so he pays little attention to short-term moves
The measure he uses for credit quality is a Federal Reserve aggregate of the entire non-financial corporate sector — public and private, all sizes, not just S&P 500 issuers and not just investment grade bonds
It sets short-term assets against short-term liabilities: "that ratio is, I want to say, around 95% or roughly 95 cents for every dollar in short-term liabilities", which he says is high relative to the past handful of decades
That is the cushion that carries companies through a speed bump in earnings or in the economy
With spreads this tight he looks at the yield rather than the spread: investment grade corporates average 5% or more, and high yield seven to seven and a half percent, which he calls pretty attractive
Inflation-Protected Treasuries Are Serially Underowned
Schwab's house view is that inflation stays elevated for the next handful of months and then declines in early 2027, while colleagues at the Schwab Center for Financial Research still expect it to hold above 2% for the next handful of quarters
His own concern is structural rather than cyclical: not a return to the 2022 highs, but a persistent 2%-plus environment
"I think they're a serially underowned asset for a lot of investors" — he says very few Schwab clients own Treasury Inflation Protected Securities, despite them being one of the best long-run ways to protect against inflation
How the yield works: a 10-year TIPS yield is a real yield, already inflation adjusted, and sits between 2.25% and 2.5% now. Held to maturity, it beats the annual change in the consumer price index by that much, and any pickup in inflation is added on top because the principal is indexed to it
"There's very few asset classes that give you that direct inflation protection the way TIPS do."
Hyperscaler Debt Issuance Keeps Climbing, and Diversification Is His Answer
The host's setup was that the hyperscalers keep choosing debt over equity, and that Google did what he called the biggest corporate raise in American history earlier this year
These companies historically did not issue much debt, which is part of why their credit ratings are so high. What changed is the sheer scale of the spending
He said he looked into it a few days earlier, taking the four or five largest hyperscalers by announced capex over the next few years, and that he is not allowed to name specific issuers
About $30 billion of debt collectively in 2020
A little over $100 billion last year
More than $200 billion this year already, through the end of August, and not expected to stop
The reason is that there is no other way to fund it at this size. They will keep using a mix of cash flow and debt, but the scale means they need more capital, and he expects more and more issuance over the next few years
His response is diversification, not alarm: not being overweight one issuer or one sector, and holding investment grade across a number of sectors, because the success and profitability of a lot of these projects is unknown
The Rise in Long-Term Yields Is Growth First, Deficits Third
The host closed by noting that HSBC called 5% the danger zone earlier this year, that long-term yields have reached a multi-decade high not seen since 2007, and that the Treasury has drawn its line, then asked whether he is worried for the average American rather than for the government or corporations
"Yeah, I'm a little concerned. I don't want to be too alarmist"
Higher long-term yields raise the government's interest expense, raise business borrowing costs — not every company borrows short — and raise household mortgage rates
On what is actually driving them: "I think the driver is really stronger growth, inflation uncertainty, and then also fiscal concerns." The fiscal picture is playing a role, but he does not think it is the driver right now
The fiscal facts he cites: $40 trillion of total debt, debt-to-GDP above 100%, and very large deficits in a non-recessionary period while growth is still strong
The tail risk is the marginal lender. If the deficit is not addressed, investors may stop wanting to lend, which he says could pull yields higher still and raise questions about inflation and the value of the dollar over time
"It is a risk, but I don't think it's a risk in the here and now."
Mr. Martin's bottom line is that long-term yields at these levels are a symptom of a resilient economy rather than a problem the Treasury needs to fix, and that investors are being paid enough — in long-dated Treasuries, in corporate credit and in inflation-protected bonds — to own the fixed income market as it is.
Products, Companies & Tools Mentioned
Charles Schwab and the Schwab Center for Financial Research (Mr. Martin's employer and the source of the house views quoted throughout: the Fed on hold, inflation above 2% for the next handful of quarters, a 4.25% to 4.75% range on the 10-year)
The Bloomberg corporate bond index (His reference for investment-grade spreads, averaging around 80 basis points against a long-term average well above that)
Google (Named by the host as having done what he called the biggest corporate raise in American history earlier this year, as evidence of the shift toward debt funding)
HSBC (The host's citation for 5% as the danger zone on long-term yields, called earlier this year)
Books & Resources Mentioned
Federal Reserve corporate balance-sheet data (The aggregate Mr. Martin watches for credit quality — every non-financial corporation, public and private, short-term assets against short-term liabilities)
schwab.com/learn (Where Schwab publishes its fixed income, macro, equity, domestic and international research; he says it is all public facing and requires no client relationship)
Apple Podcasts (The episode on Apple)
Episode page (The show's own page for this episode)
Get the latest market chatter as it happens: