The bond market knows something about the $39 trillion national debt that Washington doesn’t

The national debt—a barely-comprehensible $39 trillion—seems, to hear economists tell it, forever one shock away from bringing the whole country down. Lately, the designated culprit is the Federal Reserve. The case is relatively straightforward. On June 17, the Fed didn’t raise interest rates—it held them at 3.5–3.75%, as expected—but it signaled that a hike could be coming this year, a reversal from a few months ago, when it expected to cut them instead. In his first meeting as Fed chair, Kevin Warsh made clear he’s serious about getting prices under control, with the Fed’s statement vowing that “the Committee will deliver price stability.” Traders, at least initially, took the hint and nudged their bets toward higher rates, knocking stocks lower to roughly 0.5–1% on the day amid worries that more expensive borrowing could squeeze the debt-fueled AI buildout. But it was the bond market’s reaction that was telling; short-term rates rose, but the 10-year Treasury yield, the rate that actually drives the cost of the debt, barely moved, and soon drifted lower. Why wouldn’t it drift up on concerns of the national debt?The government already spends more than $1 trillion a year just on interest, more than it spends on the military, or healthcare, and all the other fast-growing lines in the budget. But a tougher Fed needn’t touch that bill. The debt isn’t just one big loan at a fixed rate; it’s a complicated mix, because the government is constantly borrowing new money to pay off old loans, and paying whatever rate the market charges that day. When the Fed pushes rates up, only the short-term, cheaper loans get pricier.“It’s the very front end,” Eric Winograd, chief U.S. economist at AllianceBernstein and a former New York Fed staffer, told Fortune. Even if the Fed hikes, he said, slightly higher short-term rates for a year “just doesn’t really move the needle.” What matters more for the debt is