What's going on with the bond market?

Summary

Podcast Summary

Marketplace Morning Report
Episode: What's going on with the bond market?
Date: March 3, 2026
Host: Sabri Benishore (in for David Brancaccio)
Featured Guests: Steven Brown (Deputy Chief North America Economist, Capital Economics), David Whiston (Senior Equity Analyst, Morningstar)

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Episode Overview

This Marketplace Morning Report dives into recent volatility in the US bond market following escalating conflict in Iran, resulting spikes in oil prices, and how these events intersect with inflation expectations and Federal Reserve policy. The episode also covers the EPA's repeal of the Obama-era "Endangerment Finding" on greenhouse gases, and what this means for US automakers, the shift toward electric vehicles (EVs), and the auto industry’s strategic decisions.

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Segment 1: What's Going On With the Bond Market?

Begins at 00:47

Key Points

• Bond Yields and Investor Behavior

  • Bond yields rise and fall based on demand; in times of crisis, investors typically turn to bonds for safety, but this time, yields are rising (bond prices falling).
  • Quote [00:47] Sabri Benishore: “The bond market has a message: More inflation could be coming.”

• Current Context: Iran Conflict and Oil Prices

  • The war in Iran has caused a surge in oil prices due to supply fears, particularly because of potential disruptions in the Strait of Hormuz, a crucial global oil route.
  • This surge is causing investors to fear inflation, so they demand higher yields to offset the risk of diminished returns.

• Inflation Takes Center Stage

  • Quote [01:30] Steven Brown: "Investors are getting a bit concerned about inflation risks again... This shock has pushed up oil prices. The disruption to the Strait of Hormuz risks a whole lot of disruption to the global oil market."
  • Rising oil prices are expected to drive up inflation, not just in the US but globally.
  • Quote [01:54] Sabri Benishore: "This particular scariness also threatens higher inflation. And if inflation's gonna be higher, that eats into your bond return, and so you want a higher yield to compensate for that."

• Consequences for the Federal Reserve

  • Usually, in times of uncertainty, the Fed might cut interest rates, lowering bond yields. But with inflation expectations higher due to oil, cutting rates becomes less likely.
  • Quote [02:16] Steven Brown: "This is quite different because investors see this big spike in oil prices, think... that's going to push up inflation and probably mean the Fed can't cut this year or cut as much this year as it previously indicated it could do."

• Possible Scale of Impact

  • Oil had been in oversupply, which cushioned the market going into the crisis. But continued price increases could push US inflation up by a full percentage point.
  • Quote [02:56] Steven Brown: "It's certainly possible that oil prices could keep rising towards, say, $100 per barrel, in which case that could push up US inflation a full percentage point. And I think in that scenario the Fed would be, you know, a lot more concerned."

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Segment 2: The EPA's Endangerment Finding and the Auto Industry

Begins at 05:15

Key Points

• Background and Deregulation

  • The EPA has scrapped the “Endangerment Finding,” an Obama-era rule that enabled strict greenhouse gas regulations on automakers.
  • Quote [05:15] Sabri Benishore: "With that rule gone, what does that mean for automakers?"

• Mixed Reactions from Automakers

  • Automakers with significant EV investments (e.g., Tesla) lose the ability to sell emissions credits; those reliant on gas vehicles can avoid compliance costs.
  • Quote [05:53] David Whiston: "The greenhouse gas regulations are literally gone. It's pretty drastic."

• Short-Term Benefits, Uncertain Long-Term Outlook

  • Traditional automakers can continue focusing on profitable trucks and SUVs without penalties.
  • Quote [06:32] David Whiston: "They can continue to just make what they're perhaps the best at, which is making full size SUVs and pickup trucks... without also having to pay compliance penalties or go out and buy credits from firms such as Tesla."

• Market Strategy and Future Risks

  • Some may slow or pause EV investments, though the auto industry's long-term direction remains toward electrification as tech improves and international competition (especially from China) increases.
  • Quote [08:04] David Whiston: "There's definitely a risk that the US auto industry could lose in the long run from this change... In the near term...profits are going to be helped. But again, I think you see EVs come roaring back... in the 2030s, I think it certainly could happen."

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Notable Quotes & Memorable Moments

• Steven Brown defining the bond market’s message:
  "I think the key thing here is that investors are getting a bit concerned about inflation risks again." [01:30]
• Sabri Benishore on the double-edged sword of crisis-induced inflation:
  "This particular scariness also threatens higher inflation. And if inflation's gonna be higher, that eats into your bond return, and so you want a higher yield to compensate for that." [01:54]
• David Whiston’s summary of the regulatory rollback’s impact:
  “The greenhouse gas regulations are literally gone. It's pretty drastic.” [05:53]
• Long-term industry view from Whiston:
  "If you're not investing now for that future, you're probably going to be in a lot of trouble next decade." [08:04]

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Important Segment Timestamps

• Bond Market & Inflation Discussion – 00:47 to 03:32
• Impact of EPA Deregulation on Automakers – 05:15 to 08:36

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Tone & Style

The conversation is measured and analytical, blending plain-English explanations (for lay listeners) with expert insight. The guests and hosts underscore both immediate impacts and longer-term economic ramifications, balancing pragmatic observations with caution about the future.

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Summary Takeaway

Amid global crisis and spiking oil prices, the bond market is signaling heightened inflation risk – putting the Federal Reserve’s rate cut plans in doubt. Simultaneously, US automakers face a dramatically altered regulatory landscape, with fewer incentives and requirements to build zero-emission vehicles even as global trends increasingly point toward an electric future.

Transcript

[Sabri Benishore]

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[David Whiston]

the

[Sabri Benishore]

bond market has a message More inflation could be coming from Marketplace. I'm Sabri Benishore in for David Brancaccio. Bond yields are the payoff people get when they invest in bond. These go up, these go down. And one of the things that drives that is how hungry investors are for bonds. When the world gets scary, they're usually very hungry because bonds are safe, safer than the stock market. Investors are like, I don't care if I don't make a lot of money, I just want my money to be safe. With the Iran war, though, the opposite is happening. Bond yields are going up. Investors are not as hungry. Why not? Short answer, inflation. We called up Steven Brown, deputy chief North America economist at Capital Economics, to find out more.

[Steven Brown]

I think the key thing here is that investors are getting a bit concerned about inflation risks again. So the nature of this shock is obviously that it's pushed up oil prices. The disruption to the Strait of Hormuz risks a whole lot of disruption to the global oil market. So we've seen oil prices surge since the end of last week, and that's likely to feed through to higher price inflation, you know, both in the US and across the world.

[Sabri Benishore]

So on the one hand, investors might well want to keep their money safe in bonds because the world is scary. But at the same time, this particular scariness also threatens higher inflation. And if inflation's gonna be higher, that eats into your bond return, and so you want a higher yield to compensate for that.

[Steven Brown]

So typically when we're talking about kind of a scary shock of some sort, it often means people are worried about the outlook, the US Economy. And in that scenario, they think, well, the Fed might end up cutting interest rates here and that will help pull down those bond yields. Whereas the current context is quite a bit different because investors see this big spike in oil prices, think, well, the key thing here really is that that's going to push up inflation and probably mean the Fed can't cut this year or cut as much this year as it previously indicated it could do.

[Sabri Benishore]

So if this is about inflation, just how big of an inflation effect are we looking at here from this war?

[Steven Brown]

The oil market was in a state of kind of oversupply to begin with. OPEC were increasing production. There were some concerns about global demand softening a touch. So we've kind of come into this conflict in a relatively kind of positive situation in terms of the dynamics in the oil market. But it's certainly possible that oil prices could keep rising towards, say, $100 per barrel, in which case that could push up US inflation full percentage point. And I think in that scenario the Fed would be, you know, a lot more concerned.

[Sabri Benishore]

Stephen Brown, Deputy Chief North America Economist at Capital Economics, thank you so much.

[Steven Brown]

Always a pleasure. Until next time.

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[Sabri Benishore]

In February, the EPA scrapped what's called the Endangerment finding. That was a rule issued back in 202009 under the Obama administration, and it said that greenhouse gases threatened public health. That paved the way for more tailpipe emissions standards for the auto industry. With that rule gone, what does that mean for automakers? David Whiston is An auto analyst at Morningstar and joins us. Good morning.

[David Whiston]

Morning.

[Sabri Benishore]

So some automakers seem to welcome this deregulation. Others are a little more skeptical. What are the upsides and the downsides of this move from the perspective of the auto industry?

[David Whiston]

Yeah, I think that depends to who you are. And what was your EV and zero emission vehicle exposure prior to the rules changing? I mean, the most extreme example, of course, is Tesla, which only sells electric vehicles, so they can't sell compliance credits to American competitors anymore. With the endangerment finding getting repealed, the greenhouse gas regulations are literally gone. It's pretty, it's pretty drastic by the

[Sabri Benishore]

Trump administration for companies that maybe have not gone as hard on electric vehicles. What do these rule changes mean for them?

[David Whiston]

So in the near term, the good news for these companies is they can continue to just make what they're perhaps the best at, which is making full size SUVs and pickup trucks that are extremely profitable. And you can make that now without also having to pay compliance penalties or go out and buy credits from firms such as Tesla. And so I think the question here is, do you just forget about zero emission vehicles and only focus on gas guzzlers? Well, that's probably not a good idea because longer term the industry is likely to keep moving towards zero emission vehicles as battery costs come down.

[Sabri Benishore]

So some automakers have invested, as you mentioned, billions into EVs. They don't have to walk back those new models, those new factories. It's just that they can if they want to. Why do they want to?

[David Whiston]

Basically, the industry probably went too far. You know, go back in time a few several years ago, Tesla's skyrocketing in market value and then regulation was certainly looking very much on the side of pushing the industry to EVs. So late last decade, a lot of automakers started making very large investments in EVs. Trump administration has reversed all those regulations and that's now, God automaker saying, well, I can keep making vehicles that I probably can't sell, or we can just take some impairments and change production.

[Sabri Benishore]

But there's also the argument that the future is electric and if they don't move, they will eventually be left behind.

[David Whiston]

There's definitely a risk that the US Auto industry could lose in the long run from this change. I'm not saying that's definitely going to happen because I think in the near term I think the profits are going to be helped. But again, I think you see, EVs come roaring back. Now, is that going to happen in 27 or 28 probably not, but in the2030s, I think it certainly could happen. And I think it's a matter of time for the Chinese are selling here, too. And so if you're not investing now for that future, you're probably going to be in a lot of trouble next decade.

[Sabri Benishore]

David Whiston is a senior equity analyst for Morningstar. Thank you so much.

[David Whiston]

Yeah, sure.

[Sabri Benishore]

In New York, I'm Sabri Benishore with the Marketplace Morning report. From apm, American Public Media.

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