While Wall Street fixates on whether the Federal Reserve cuts in September, Shelton Capital Management's Gary Stringer is looking somewhere else entirely: the long end of the curve. In the firm's latest Real Investment Insights1 update, host Jonathan Bernstein frames the episode around a puzzle. The Fed has been patient, yet yields on longer-dated Treasuries have been climbing. Stringer, Lead Portfolio Manager for the Shelton Active Allocation Solutions, argues this is no accident. It is structural, it is persistent, and historically speaking, it is not even unusual.
The Fed Is Not the Story
Bernstein sets the table with three forces: a $2.1 trillion federal deficit, an unprecedented wave of AI-related corporate bond issuance, and a Fed chair deliberately saying less than his predecessors. Stringer acknowledges the near-term backdrop first. Softer data across the July jobs report, retail sales and inflation mean "the market's pricing in less likelihood that the Federal Reserve will change interest rates at the next meeting in September."
But he quickly pivots. "We think there's more important things going on in the background rather than just is the Fed going to cut rates."
Less Guidance, Higher Term Premium
The first background force is communication itself. "Chairman Warsh is offering less forward guidance, which increases uncertainty," Stringer says. "And typically when there's more uncertainty, the market prices in higher long-term yields to compensate for that increased uncertainty. So that's not that surprising."
In other words, the term premium, the extra yield investors demand for holding longer bonds, rises when the path ahead is murkier. A Fed that says less is, indirectly, a Fed that pushes long rates higher.
Supply, Supply, Supply
The second force is arithmetic. "Continued deficits. All else being equal, to fund these deficits, the Treasury has to issue more debt," Stringer says. "And the more greater supply you have of that debt, the higher the yields would move there."
He is unmoved by the Treasury's announced plan to expand buybacks of longer-term paper. "We're kind of skeptical that's going to have much of an impact," he says, drawing on international precedent: "When we see this kind of thing happen around the world, it'll have a short-term, near-term impact, but longer term doesn't have much of an impact because the structural issues still remain." His read on what actually happens next is blunt: "We think they're actually just going to refinance that with some additional shorter-term debt."
Then there is the private sector. The AI buildout is driving corporate issuance to levels the market has never seen. "We're going to see probably more than half a trillion dollars this year in 2026," Stringer says. "And it looks like that'll continue for years to come." Sovereign and corporate borrowers are competing for the same pool of capital, and the price of that capital is yield.
The Market Is Coming Around
Stringer's evidence that the thesis is taking hold is price action. "Every time that we've seen a dip in long-term interest rates, they've kind of bottomed and went right back to where they were, if not somewhat higher," he says. "So it looks like the market is starting to agree with us that these relatively higher interest rates are actually going to be persistent and be with us for a while."
Anomaly Reversed
The most important reframing comes last. Stringer's point is that today's rates only look high against a distorted reference period. "Where rates are today, the 10-year Treasury yields and longer are actually about where they were from the 2000 to 2007 cycle," he says. "So these lower interest rates were really the anomaly, starting with the coming out of the financial crisis in 2009 and through the pandemic."
Current yields, he adds, remain "still lower interest rates on the 10-year and longer level than what we saw in the 1990s, and certainly lower than we saw in the '80s." His conclusion: "This is not the new normal, it's just normal."
Bernstein closes by summarizing the case: deficit-driven Treasury supply, surging AI-related debt issuance and elevated term premiums are building, and may already be reflected in bond market behaviour that, viewed historically, is not odd at all.
Five Key Takeaways for Advisors and Investors
- Separate the Fed from the curve. Short-rate policy and long-rate structure are different stories. The Fed can hold while the 10-year moves higher.
- Less forward guidance means a higher term premium. Uncertainty is priced, and investors pay for it at the long end.
- Supply is the dominant driver. A $2.1 trillion deficit plus half a trillion in AI-linked corporate issuance is a lot of paper for markets to absorb.
- Do not count on buybacks. Shelton expects Treasury buybacks to shift duration, not reduce it, with only fleeting effects on yields.
- Reset the anchor. Measured against 2000 to 2007, the 1990s or the 1980s, today's yields are ordinary. The 2009 to 2021 era was the outlier.
Footnote:
1 Bernstein, Jonathan, and Gary Stringer. "Why We See a Higher Rate Path Even with the Fed on Hold." Real Investment Insights, Shelton Capital Management, 1 Sept. 2026, https://www.youtube.com/watch?v=Pp6R3HhTmwk.
