Normally, investors rush into Treasurys at a whiff of economic chaos but now they are selling them as not even the lure of higher interest payments on the bonds is getting them to buy. The freak development has experts worried that big banks, funds and traders are losing faith in America as a good place to store their money.
“The fear is the U.S. is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.”
That could be bad news for consumers in need of a loan — and for President Donald Trump, who had hoped his tariff pause earlier this week would restore confidence in the markets.
This is arguably bigger news than the stock market.
It definitely is. If bonds don’t sell, or at least no longer sell cheap, then the US might get bigger problems with their budget.
republicunts plans to finance rich people tax cuts with additional debt in shambles
i heard this was thier lynchpin to fund the tax cuts?
If US Bonds are no longer the de facto safe haven asset…
The USD is no longer the world’s de facto reserve currency.
That means that even if all the tariffs were rescinded, Trump croaked and somehow JD Vance took a ‘be at least somewhat more competent and less stupid’ pill, and never reinstated them…
Well it would mean the dollar would crash against other currencies, we wouldn’t be able to import anywhere near as much, and US international debt payments as a percentage of the yearly budget would climb fast.
… And then that could spiral into both massive austerity at home, and/or ‘lol we are defaulting on our international debt’ either by formal declaration, or… basically hyperinflation.
then u sell ur aircraft carriers and f35s lul
That’s not what happens in this scenario… Those aircraft carriers and F35s get activated.
Bond sales are only politically connected to the budget; not financially. Not selling bonds would in no way hinder congress from passing a budget.
I’m no expert but it seems to me if the yields have to go up to get buyers, it’s like raising the interest rates on a loan. You can still get the loan but you have to buy less car/house if you want to afford the payments.
You’re mostly right.
Most T Bills and Bonds… they don’t work like a credit card or a home loan.
Those are things you pay a bit on every month, and the interest rate is an APR, which means Annualized Percentage Rate, which means the monthly interest rate you are paying is the APR divided by 12.
So with those, the bank gets money every month untill you pay it all off.
With Bonds… say a 5 year Bond… you pay for the Bond, newly issued by the US govt, and 5 years later, you hand it back to them, and they pay you the face value + interest rate.
But, people who have already bought a bond, well they can sell it again, before it matures, to… some other guy, some other country, some other firm.
Thats called the ‘secondary market’, and most of the time you hear a news story about bond prices and yields, its a second party selling a bond to a third party.
Generally, when the US does an issuance auction of new debt directly… well, it has to generally track the prices and yields set by the various secondary markets, sorta like how you’d wanna check a car salesman’s price against kelly blue book to make sure you’re getting a reasonable deal.
There were moments in thr GFC, 07 08 09, where US debt auctions … didn’t actually result in the amount of bonds expected to sell, actually selling, because there were enough potential bond buyers who assessed that the US was offering unreasonable prices and yields, given the economic turmoil.
… I am not an ‘expert’ either, but I do actually have a BSc in Econ, and I apparently remember a good deal of my courses, and enjoy infodumping lol.
Thank-you for your info dump :)
The prices and yields of bonds have an inverse relationship:
If price goes down, yield goes up.
The yield is also known as the interest rate.
This interest rate * the purchase price is paid by the US government to the bondholder at the end of the duration of its term.
When you look at the US Federal budget, and see the amount that goes toward making debt payments…
This, bonds, are a very big part of what you are looking at.
If the interest rate on US debt instruments are going up… that means more and more of the budget has to be allocated toward debt repayment.
While yes, extremely directly, bond yields rising doesn’t… mechanically make the passing of a budget impossible in some kind of procedural way…
It very much makes the stakes higher as now our growing debt problem is growing even faster.
Not really. US debt is held in those bonds, and it is a perpetual game of selling and repaying them. If they don’t sell anymore, the old ones have still to be repaid - or default. You don’t want to experience this.
The “debt” of a monetarily sovereign state is really nothing like the debt of a household or business. The US could pay off all its debt in an instant by an act of Congress. Not saying that would be a good thing, but there are no financial constraints stopping Congress from doing that; only political ones.
Yes, of course it could. But then, nobody (except maybe some terminally stupid MAGA-heads) would ever lend the US any money. The treasurey could mint a bunch of trillion dollar coins to the same effect, so congress would not be needed. But the (devastaing) effect would be the same.
This does not mean I would put such a dumb move beyond Trumps reach. Big photo op, “See, I’ve eliminated the whole national debt with a stroke of my sharpie! Biden was too stupid to do this!”
Waaaay biger news
Can’t fund that big bad military when all those dollars go to pay off those bonds.
I sold some bonds 3 days ago. I just don’t trust this administration won’t default on something in the next 6 months. Or do something else to drop out AAA rating.
Preventing this was originally what people thought was causing him to pause