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

A more hawkish Fed could be bad news for the record debt. The bond market decided to ignore it.

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% to 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% to 1% on the day amid worries that more expensive borrowing could squeeze the debt-fueled AI build-out. 

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, health care, 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 are the rates the government locks in for 10 or 30 years. And those are falling right now, mostly because oil prices have dropped and inflation is cooling. Buyers keep showing up at the auctions where the government sells new debt. That “debasement trade” that dominated winter’s media headlines, that the world is dumping Treasuries for gold? “More talk than action,” Winograd says.

But there are still two warning signs underneath the calm. 

The first is that investors have slowly started charging more to lend to the government for the long haul, a kind of nervousness premium that’s now the highest it’s been in over a decade, according to a note from David Doyle, the head of economics at investment bank Macquarie. The second is the deficit. The government is borrowing about 6% of the entire economy a year even though unemployment is low and the economy is healthy; a combination that’s historically bizarre. Normally, it would only borrow this heavily in a recession.

Secondly, the official forecasts may be too rosy. The government pays an average of about 3.35% on its debt today, and budget forecasters assume that creeps up to only 3.9%. If it climbs to 5% or 6% instead, Macquarie warns, then the interest bill balloons and the deficit could top 10% of the economy, leading to a negative feedback loop where more debt feeds wider deficits feeds still more borrowing.

There’s a darker possibility as well, that the calm in long-term rates may be partly manufactured, argues Erik Norland, chief economist at CME Group in a note. The government has been borrowing more short-term and less long-term, while the Fed has slowed the sale of its own bond holdings; both of which hold long-term rates down artificially. You can see what happens without that cushion overseas, where the same money troubles have sent long-term rates soaring in Japan, the U.K., and France.

But even with all that, there’s no crisis yet. There’s “no magic number” where the debt suddenly becomes unsustainable, Winograd says; it “will be sustained as long as there are lenders willing to sustain it. And so far, there have been.” If that ever changes, he adds, it’ll be a political decision by big foreign lenders—mostly Asian central banks—not an economic problem.

As for the tough talk that started all this, Winograd shrugs it off. “I don’t read too much into the hawkishness,” he says. “He’s been the Fed chair for one meeting.”

This story was originally featured on Fortune.com