US President Donald Trump | Photocredit: Eduardo Munoz
Was the U-turn of US President Donald Trump to escalate the trade war last Friday by threatening high rates on the EU and iPhone maker Apple, in a week in which the American 30-year-old treasury reached their highest levels since 2007, just an co-incidence? Because, if you go back a few weeks ago, until the beginning of April, he made a similar U-turn to pause the mutual rates for 90 days in the week in the week that the US 10-year bond revenues had their largest peak of one week (50 BPS) since 2001.
Op dat moment werd de obligatiemarktveteraan Jim Bianco op X gepost waarin hij de onweerstaanbare kracht van de obligatiemarkt benadrukt door James Carville (de politieke adviseur van Bill Clinton) te citeren die had gezegd: “Ik dacht altijd dat als er een reïncarnatie was, ik terug wilde komen als de president of de paus of als een .400 honkbalhitter.
When the sovereign bond yields the peak of bond, all financing costs rise and must adjust accordingly – the risk -free interest rate increases, the interest rates of borrowers (government and private) and the tax deficit as a percentage of the gum, also, the racing of the gums, also, the ramps, the ramps of the gums, the raids of the gums, leverage in developed economy such as the US and Japan. All these also have implications for shares/ratings, although they can take the time to play.
So, with the peak last week, Trump was again informed by the Bond Vigilantes. The problem for him is that it is now becoming a frequent event – first at the beginning of January of this year, then in April and now again!
Double talk
In recent weeks there has been what one can mention as double talking or misleading conflicting signals about the economic agenda of the Trump government. From the start of Trump 2.0 to mid -April and especially for days of deep correction in markets after mutual rates, Minister of Finance Scott Bessent was strongly pushing that the US economy needed a ‘detox’ of excessive government spending.
The bond market loved this and long-term treasury-ups-ups decreased until the beginning of April, when an unexpected and unclear twisting of positions caused the proceeds to peak again (while there were views that this was possible because of China that was sold to American Tarnis in the final).
In recent weeks, with the administration that works hard to go through ‘one big great account’ aimed at tax cuts that will also increase the debt ceiling, bond investors seem to be shocked again. Especially when this happens in the background of the American assessments.
Last week Bessent said that the US would deal with debts by ensuring that the economy grows faster than the increase in debts. This means that he is not looking for ‘detox’ in the economy, but that it grows faster.
This is a complete shift in their agenda. The most important thing to note here is that it now seems that Trump can be in a position of ‘damn if you do it and are damned if you do not do’.
Escalating tariff wars cause fear that China or other countries could take revenge by sending the sale of treasury bonds higher, while de-escalation in tariff wars, combined with an increase in debt ceiling, causes concern that economy will rise overheat and inflation, which results in the current Bondshytrum.
So although Trump’s rate war escalation may have his roots last Friday in an attempt to cool the bond returns by focusing on the eurozone and not the three biggest holders of American treasury bonds – Japan, the UK and China – is the risk that his administration can lose control of the story.
Japanese bonds
Now press his bond tantrums that take place in Japan. The Japanese 30 -year bonds also yields last week and at the highest level on record. This makes it busy on the Japanese government (largest holder of American treasury) and private investors to reconsider their American treasury investments.
As it is, a falling $ and falling American bonds (US provides Spike) is a double whammy for the value of their American bonds. This is now combined with their domestic bond market route, making Japanese bonds more attractive. According to some macro experts, there is therefore a risk of a similar type of volatility caused by the settlement of Yen CarryTrade that took place in August last year.
Stock markets
All the above factors combined now form a strong obstacle for us and global stock markets. The strong recovery in Dow Jones, S&P 500 and Nasdaq Composite from the LOS points of April will probably be reversing from here if the bond returns will continue to be raised. It would be worth noting that last Thursday around 1 p.m. New York Time, the American Indices, a sharp intra-day reputation to the disadvantage booked when an auction for $ 16 billion was witnessed by new 20-year treasury tires
Indian bond markets reflect an oasis of calmness in the midst of these tantrums. However, the risk of domestic stock investors can arise from how FPIs react now.
In the meantime, gold can continue to find towers when uncertainty rules.
Published on May 24, 2025
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