The UK provides a real-world example of how policy inaction doesn't guarantee stability. Despite the Bank of England holding its target rate steady for over six months, the UK two-year bond yield has fluctuated within a wide 100 basis point range, showing what could happen in the U.S.

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.

Drawing parallels with the UK's experience, analysis suggests that while aggressive actions like cutting auction sizes can cause a significant initial drop in yields, the effect is not durable. Subsequent interventions tend to have a shorter half-life and less impact, as market fundamentals ultimately reassert themselves.

Despite massive deficits, the US Treasury market hasn't broken because the economy is in a depressionary state. Similar to the 1930s, the overwhelming demand for safety and liquidity from global investors surpasses concerns about the government's fiscal irresponsibility, keeping interest rates low.

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.

Unlike their intended purpose of improving liquidity for illiquid bonds, the Treasury's recent buybacks were a strategic signal. With market functioning metrics appearing normal, the move was an attempt to communicate the Treasury's belief that long-term yields were fundamentally mispriced, although the market's quick reversal showed the limited power of this signal.

Bond vigilantes are seeking a target to punish for fiscal irresponsibility. While the US and France have worse debt profiles, they are shielded by the dollar's reserve status and the Eurozone, respectively. The UK, lacking these protections, is the 'weakest kid in the playground' and most likely to face a market reckoning.

The U.S. Treasury's 'convenience yield' has been declining as the world becomes more multipolar and less reliant on the dollar. This gradual erosion of America's unique financial advantage means that, all else equal, Treasury yields are likely to be structurally higher in the coming decades.

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.