The sharp rise in US borrowing costs has been explained by multiple factors: persistently resilient inflation, a high federal fiscal deficit, and strong economic growth driving up capital demand. However, the more fundamental reason for the recent rise in US Treasury yields is the significantly increased market confidence in the new Federal Reserve Chairman, Kevin Warsh. Details of the yield curve indicate that investors believe Warsh will adhere to policy and address current economic challenges with persistently high interest rates. For observers concerned with the independence of monetary policy, this is a positive sign. Monetary policy independence is the cornerstone of stabilizing prices and maintaining healthy economic growth. However, US Treasury Secretary Scott Bessant sees a different picture: changes in bond market pricing mean he can no longer postpone the costs of mismanagement of public finances. If high yields persist, the negative consequences of fiscal policy will eventually become apparent before the end of Trump's current term, and Bessant's plan to avoid locking in high Treasury interest costs will fail. The surge in real yields on US Treasury bonds stems from increased credibility of the Federal Reserve . Let's look at the market data. Over the past month, yields on sovereign bonds of all maturities globally have generally risen, but the increase in yields on US 2-5 year inflation-adjusted (real) Treasury bonds has been the most significant. The turning point was Warsh's most hawkish speech at the Jackson Hole Economic Symposium in Wyoming. He stated that core inflation must be confirmed to be moving towards the 2% target; if not, the Fed has more work to do. Following the Jackson Hole meeting, real yields on short- and medium-term US Treasury bonds have continued to rise. The market is pricing in the likelihood that the Federal Reserve will continue raising interest rates in the coming months and maintain a tight monetary policy for an extended period until inflation is brought under control. The break-even inflation rate, a measure of market inflation expectations, has barely fluctuated, indicating that the current yield increase is not due to market concerns about inflation spiraling out of control. Since the Jackson Hole speech, the real yield on 2-year US Treasury bonds has risen by 0.57 percentage points, and the 5-year yield by 0.64 percentage points. While long-term Treasury yields have changed, the increase has been far less than that of short- and medium-term bonds. This rules out two main hypotheses: this round of increases is not due to the market revising its long-term economic growth expectations, nor is it simply a concern about the government's debt repayment capacity. If AI were to drive productivity growth expectations in the long term, the changes would be concentrated in 10-year and longer-term bonds; if the market is concerned about the risk of US debt repayment, the reaction in long-term bond yields would be the most dramatic. Key events driving the market: The Jackson Hole speech and the Fed's September 16th rate hike contributed half of the increase in real yields; the remaining volatility came from three macroeconomic data releases: the better-than-expected PPI (Producer Price Index), the higher-than-expected CPI (Consumer Price Index), and the S&P US Composite PMI (Purchasing Managers' Index). Of the three, only the PMI is related to economic growth, and the report showed that input price growth was rising. Even with persistently strong inflation data, the market interpretation remained quite stable: it believed the Fed had the ability to suppress inflation. Two other signals supporting the Fed's increased credibility: a stronger dollar and a decline in gold prices, a hedge against dollar depreciation. If unsustainable fiscal policy were the main driver of the market movement, the market should have seen a weaker dollar, higher gold prices, and a steeper yield curve—the complete opposite of the current situation. Bessant's financing strategy suffered a major blow . This "vote of confidence" in the Fed directly disrupted Bessant's financing plan to fill the US fiscal deficit. Bessant himself is a former hedge fund manager. After taking office, he relied heavily on short-term Treasury bills with maturities of less than one year to raise funds and fill fiscal gaps. Ironically, Bessant had previously criticized this practice of his predecessor, Treasury Secretary Yellen, but continued it after taking office. Recently, he went a step further: the Treasury repurchased existing long-term Treasury bonds, with funding still relying on newly issued short-term bonds. Bessant's thinking was clear: reduce the scale of long-term bond issuance, thereby suppressing long-term yields—long-term interest rates directly affect mortgage and various types of household credit costs. As a macro trader, he bet that after interest rates fall in the future, the Treasury will issue more long-term bonds to lock in lower financing costs. The Trump administration's debt management plan has been heavily criticized not only because it is short-sighted, but also because the accompanying macroeconomic policies are almost destined to push up inflation and bond yields: tariffs raise the prices of core commodities, and the situation with Iran pushes up oil prices. Trump and Bessant originally envisioned that the Federal Reserve would comply with the White House's wishes and postpone interest rate hikes, at least until the end of the term, leaving the problem of high borrowing costs to the next administration. But the reality has completely deviated from expectations. The Costs Are Emerging: Residents and the Treasury Will Both Suffer the Pain of High Interest Rates The pressure from rising yields will be passed on to ordinary citizens. In a medium-term high-interest-rate environment, mortgage rates will remain high; corporate financing costs will increase, and the pace of employment recovery may slow. Continued increases in interest payments will further exacerbate federal fiscal pressure in the coming years—a foreseeable consequence of the Treasury's short-sighted debt management model. Bessant should begin shifting to more prudent debt management next year, gradually lengthening the duration of US Treasury bonds. The market's expression of confidence in the Federal Reserve's commitment to price stability through pricing is a good thing in itself. Persistently rising bond yields may even force Congress to reconsider excessive fiscal spending.