A top Federal Reserve official said the steep cost of President Trump’s major policy bill caught the bond market off-guard, leading to a spike in U.S. interest rates.

In a Thursday interview, Federal Reserve Governor Christopher Waller said bond traders were “surprised” by a lack of “fiscal restraint” in the House GOP’s bill — passed earlier in the day — to implement Trump’s agenda.

Yields on U.S. Treasury bonds have soared throughout the week as the House advanced the One Big Beautiful Bill Act, which is expected to add trillions to the national debt. The bill extends and expands upon Trump’s 2017 tax cuts while cutting Medicaid spending a wide range of other safety net programs.

“The markets are watching the fiscal policy … the bill being put through the House and the Senate, and they have some concerns about whether it’s going to be reducing the deficit,” Waller said on Fox Business Network’s “Mornings with Maria.”

“We ran $2 trillion deficits the last few years. This is just not sustainable. And so the markets are looking for a little more fiscal discipline. They’re concerned,” Waller continued.

Despite the White House’s claims that the bill would be deficit neutral, budget experts across the ideological spectrum project the bill to add even more to the $36 trillion national debt.

The nonpartisan Congressional Budget Office (CBO) said the tax cuts included in the bill would add roughly $3.7 trillion to the national debt over the next 10 years.

“Everybody I’ve talked to in the financial markets, they’re staring at the bill, and they thought it was going to be much more in terms of fiscal restraint, and they’re not necessarily seeing it,” Waller said.

Fiscal hawks have expressed concerns that the rising national debt will continue to push interest rates on Treasury bonds higher, forcing the government to pay hundreds of billions of dollars more just to service the debt.

Yields on a wide range of Treasury bonds, which rise as U.S. debt becomes less attractive to own, shot up Tuesday as the House closed in on the final version of Trump’s bill. A weaker than expected Treasury bond auction Tuesday deepened concerns about the national debt.

Waller also cited a decline in global demand for U.S. stocks and assets that took hold as Trump ramped up his tariffs and brought American trade with China to an effective halt.

“There does seem to be a risk off on American assets across the board, not just government debt, but everything. And whether that continues in the future or not, I don’t know,” Waller said.

“I think as long as the economy kind of gets back on a good path, the economy starts growing, inflation stays low, and you might see a resurgent demand for U.S. assets.

Waller, a Republican, was appointed to the Fed board by Trump and confirmed by the Senate during the president’s first term. Fed watchers consider Waller to be among the top candidates to replace Fed Chair Jerome Powell when the latter’s term leading the Fed board ends in 2026.

Trump has raged against the Fed and Powell, specifically, for declining to cut interest rates this year as the president’s trade agenda roils global markets. While several other central banks abroad have cut rates, the Fed has kept steady as a relatively strong U.S. economy and potential inflationary risks complicate its plans to slash rates twice.

Waller said that a breakthrough in U.S. trade with China could clear the way for rate cuts to wrap up the year.

“Very high tariffs are going to be much more disruptive to the economy. So if we can get the tariffs down closer to 10 percent, and then that’s all sealed, done and delivered somewhere by July, then we’re in good shape for the second half of the year,” Waller said.