Investors now expect the Federal Reserve to raise interest rates, possibly at its meeting later this month, and that expectation set off a worldwide selloff in government bonds at the start of September.
The bonds being sold are not in trouble. They pay a lower interest rate than the ones investors think are coming next, and Marshall-Genzer said that expectation on its own is enough to make holders want out.
"Well, investors think the yield, the interest rate for bonds sold in the future will rise, so they're trying to get rid of their older bonds, which pay a lower yield."
Nancy Marshall-Genzer covers Washington for Marketplace and has reported on the history of the Federal Reserve.
I listened to the full segment so you can skip it.
Here are the 4 takeaways that matter.
👤 Guest: Nancy Marshall-Genzer, a Marketplace correspondent who covers Washington and has reported on the history of the Federal Reserve
🎙️ Host: Kimberly Adams, host and senior editor of Marketplace Morning Report
📰 Published: 1 September 2026 on marketplace.org (Marketplace Morning Report)
🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 2 min
Key Takeaways
Investors are selling bonds they already own because they expect the next ones to pay more The older bonds are locked at the lower interest rate, and that is the whole reason to sell them
The move investors are positioned for is a rate increase, possibly at this month's Fed meeting They read Kevin Warsh's promise at Jackson Hole to tame inflation as a signal that rates go up
Budget deficits in the US and Japan are the reason there are so many bonds to sell A larger supply of bonds forces governments to offer a higher interest rate to place them
Money leaves stocks when bond yields rise, because the safer asset starts paying enough
1. Older bonds pay too little
Adams opened by asking what was behind the selling. Marshall-Genzer put it on expectations about bonds that have not been issued yet, rather than on anything wrong with the bonds already outstanding.
The selling is driven by what investors think future bonds will pay, not by the bonds they hold now. "Well, investors think the yield, the interest rate for bonds sold in the future will rise, so they're trying to get rid of their older bonds, which pay a lower yield." Marshall-Genzer glossed the yield in the same breath as the interest rate a bond pays, so the complaint about an older bond is simply that its rate is fixed at the lower level
The selling is global rather than confined to one country's debt, which is how Adams introduced the story at the top of the show
2. The Fed is expected to hike
Adams did not take the first answer and asked how investors could be so sure that interest rates on new bonds would increase. The answer was about the Federal Reserve rather than about the bond market.
Investors now expect the Fed to raise interest rates, and possibly to do it at its next meeting later this month. That is the expectation the selling is built on
The evidence investors were working from was the Fed chair's own Jackson Hole speech. "They were listening closely on Friday when Fed Chair Kevin Warsh made his big Jackson Hole speech and promised the Fed would tame inflation." Marshall-Genzer said one of the ways the Fed does that is by raising interest rates, which is the step from the promise to the expected hike
3. Deficits force yields up
Adams asked why governments everywhere are borrowing so much in the first place. The answer moves the explanation from what investors expect to how much paper they are being asked to absorb.
Governments are issuing more bonds because they are spending more than they take in, and the extra supply is what lifts the interest rate they have to pay. "Well, countries like the U.S. and Japan are running huge budget deficits, and they are having to borrow a lot by issuing bonds. With such a huge supply of bonds, governments have to offer a higher yield or interest rate to attract investors." The two countries Marshall-Genzer named are the United States and Japan The mechanism is competition for buyers: with that much on offer, a government has to pay more to get its bonds taken up
4. Bonds look safer than stocks
Adams pointed out that the bond market is not moving in isolation and asked what it does to equities. Marshall-Genzer described a straight switch out of one asset and into the other.
Stocks can fall when bond yields rise, because the safer asset starts paying enough to be worth owning. "Investors are figuring bonds are safer than stocks, so why hold riskier stocks when you can get rock-solid bonds with a really good, almost guaranteed return on your investment?" She described the result plainly: investors sell their stocks and buy bonds instead
Bonus Insights
Adams framed the selling as a worldwide event, and as a judgment about risk, before the correspondent said anything. "There's a worldwide sell-off underway as investors decide that holding on to their older bonds could be a risky bet." That framing is the show's, not Marshall-Genzer's
Adams pushed back on the first answer, asking how investors could be so sure rates on new bonds would rise, and it was that question that produced the Warsh material
Adams also supplied the link to equities. The correspondent's account had stayed inside the bond market until the host asked what it means for stocks
Marshall-Genzer's bottom line is that the selloff runs on one expectation, that bonds issued from here will pay more than the ones already outstanding, and that the deficits and the move out of stocks both follow from it.
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