Jurrien Timmer(@TimmerFidelity):Below is a longer view of real yields vs real potential GDP growth and R-Star. For the ever-rising debt burden to remain sustainable, it’s essential that economic growth remains above the country’s funding rate. Based on the CBO’s real potential growth rate of 2.5% (and falling below 2% in the coming years), that is no longer the case. Hopefully, the CBO projections are too low given the AI boom that is currently underway. If not, we run the risk that the rising cost of capital will choke off the economy’s formidable growth. Note below that the last few times that the real yield spiked to or above the real potential growth rate were 2007, 2000, and 1994. Those were either rate shocks or growth shocks.

2026.09.24 19:05

Below is a longer view of real yields vs real potential GDP growth and R-Star. For the ever-rising debt burden to remain sustainable, it’s essential that economic growth remains above the country’s funding rate. Based on the CBO’s real potential growth rate of 2.5% (and falling below 2% in the coming years), that is no longer the case. Hopefully, the CBO projections are too low given the AI boom that is currently underway. If not, we run the risk that the rising cost of capital will choke off the economy’s formidable growth. Note below that the last few times that the real yield spiked to or above the real potential growth rate were 2007, 2000, and 1994. Those were either rate shocks or growth shocks.