Contrary to signaling fiscal weakness, U.S. government shutdowns historically cause Treasury yields to fall. The increased political and economic uncertainty drives a flight-to-safety trade, where investors buy Treasuries as a haven, benefiting the very market tied to the government in turmoil.

According to Lyn Alden, large and ongoing US fiscal deficits act as a powerful, often underestimated, "North Star" for markets. This continuous injection of capital makes it difficult to be bearish on high-quality, scarce assets over the long term.

Politicians will continue running large deficits as long as the bond market tolerates it by keeping interest rates low. The ultimate correcting mechanism for government spending isn't political discipline, but the bond market's impersonal decision to raise rates, forcing fiscal responsibility.

Historically, surges in U.S. public debt have consistently led to periods of negative real interest rates. This suggests that the sheer weight of government debt creates a structural constraint, forcing markets to keep real rates capped, irrespective of short-term inflation or central bank policy.

A self-reinforcing cycle of high government spending, lagging tax receipts, and rising interest expenses forces the Treasury to issue more debt. This "doom loop" continuously adds to the supply of bonds, putting structural upward pressure on long-end yields.

Large, ongoing fiscal deficits are now the primary driver of the U.S. economy, a factor many macro analysts are missing. This sustained government spending creates a higher floor for economic activity and asset prices, rendering traditional monetary policy indicators less effective and making the economy behave more like a fiscally dominant state.

Contrary to popular belief, low interest rates historically indicate a weak economy with high demand for safety and liquidity. Conversely, rising rates signal expectations of economic growth or inflation, as capital seeks better returns in the real economy rather than safe government bonds.

The underlying math of U.S. debt is unsustainable, but the system holds together on pure confidence. The final collapse won't be a slow leak but a sudden 'pop'—an overnight freeze when investors collectively stop believing the government can honor its debts, a point which cannot be timed.

Despite fears of fiscal dominance driving yields up, US bond yields have remained controlled. This suggests a "financial repression" scenario is winning, where the Treasury and Federal Reserve coordinate, perhaps through careful auction management, to keep borrowing costs contained and suppress long-term rates.