James Grant argues that the bond market is being squeezed by persistent inflation, heavy public and private debt, and years of ultra-low rates that encouraged risky borrowing. He is constructive on gold as a long-term debasement hedge, but warns it can still behave like a bubble over shorter periods.
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This Kitco News interview features Jeremy Saffron speaking with James Grant, founder and editor of Grant's Interest Rate Observer, about the collision between inflation, debt, credit risk, and gold. The discussion starts with macro pressure: the PCE inflation reading, a 30-year Treasury yield near 5%, weak-but-still-positive GDP growth, and declining consumer savings. Grant says the bond market is under pressure because debt supply is large, demand is measured, and the biggest damage comes not only from public debt but also from private-sector leverage accumulated when rates were near zero. He focuses on private credit as essentially illiquid debt and argues that debts originated in 2020-2021 at near-zero rates are now a source of credit risk. A major theme is insurance companies owned by private equity. …
Tactically, the setup still favors caution on duration and credit-sensitive assets while yields and inflation remain firm. Gold can stay supported, but after a strong move it is vulnerable to sharp air pockets even if the broader trend remains up.
Over the next few months, the likely path is continued pressure on leveraged borrowers, more scrutiny of private credit marks, and a market that increasingly tests whether AI spending can convert into earnings fast enough. The view improves only if inflation cools enough for the Fed to ease without upsetting the bond market.
Structurally, the interview argues for a regime where persistent debt creation and repeated monetary accommodation erode confidence in paper claims over time. In that world, hard assets like gold retain strategic value, while financial structures built on cheap money become more fragile as rates normalize.
The bond market is under pressure because debt supply is large and demand at current levels is only measured.
Grant says there is a “great supply of debt” and “rather measured demand for debt at these levels.”
Private credit is essentially illiquid debt and a growing source of credit-market risk.
He explicitly defines private credit as a fancy name for illiquid debt and links it to credit strain.
Ultra-low rates in 2020-2021 encouraged a large amount of borrowing at unusually low interest rates that is now weighing on credit markets.
Grant argues near-zero rates created debt burdens that are now becoming problematic.
When input costs are rising again and Washington is carrying this much debt, is the bond market starting to price in fiscal dominance — the idea that the Fed can talk tough on inflation, but the Treasury interest bill increasingly limits what monetary policy can actually do?
James Grant agrees the bond market is under pressure as it ought to be. He points to a great supply of debt and measured demand, and also highlights private debt formation (private credit / illiquid debt) as clogging credit markets. He notes rates were near zero in 2020-21, which instigated a great deal of lending at unprecedented low rates, and those debts are now weighing on credit markets and heightening credit risk.
How much of the risk is already embedded from the underwriting assumptions of 2020 and 2021?
Grant says it's an open secret that much of the debt was consummated at unusual/unique rates. He focuses on where the debt is housed as the growing worry — specifically life insurance companies owned by private equity groups, where capital tends to be reduced and investment portfolios reconfigured toward high-yielding private credit, weakening credit quality while increasing leverage.
What breaks the insurance model — is it policyholder withdrawals, rating agency pressure, mark-to-market events, or the need to refinance borrowers at higher rates?
Grant says all those things could be the crystallizing force, and there are enough possibilities that they've picked the life insurance business managed by private equity companies as their prime point of credit worry.
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