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That means that even if all the tariffs were rescinded, Trump croaked and somehow JD Vance took a ‘be at least somewhat more competent and less stupid’ pill, and never reinstated them…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.
The US could pay off all its debt in an instant by an act of Congress.
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
I guess I picked a bad time to stop huffing glue.
Can you fly this economy and land it?
Have you ever been to an El Salvadorian prison, Joey?
Joey, do you like it when JD Vance rubs up and down on your leg?
You ever seen a grown man naked?
Surely you can’t be serious.
Johnny what can you make of this?
Oh come on, “Freak” sell off makes it sound like there’s some mystery as to what caused this when it’s blindingly obvious what the problem is here. The markets, and far more importantly all decent and rational people throughout the world, won’t and shouldn’t have any confidence in anything as long as Donald Trump is president. The only thing that starts to fix this mess is his resignation or impeachment (and that is only a start, investigations criminal charges and sentences amendments to laws etc. all need to happen too).
Not happening, so I’d plan accordingly.
The only thing that starts to fix this mess is his resignation or impeachment (and that is only a start, investigations criminal charges and sentences amendments to laws etc. all need to happen too).
Or removal by other means.
since impeachment happened twice with trump, with no convictions, only for show and sound bites for MSM, its unlikely he will get charged or sentenced at all.
It’s not really a “freak” event when the causes are blatantly clear and self-inflicted.
Just because we have chiselled abs and stunning features, it doesn’t mean that we too can’t not die in a freak gasoline fight accident.
I am very annoyed that this use of ‘freak’ and further corruption of the term ‘black swan event’ have just gotten completely common place.
A black swan event is supoosed to be something completely impossible to have been predicted before hand because you didn’t have enough knowledge to even understand there was a kind of risk you were not accounting for.
An ‘unknown unknown’, to use the only useful idea Donald Rumsfeld ever came up with.
… This bond sell off is utterly predictable, unless you are completely brainwashed into a delusional level of normalcy bias and complacency.
All you have to do is realize the US is acting like an unstable dictatorship… which it very obviously is… and this is an easily predictable outcome for anyone with a decent knowledge of macroecon theory/history.
There’s a reason for that. Maybe if all those well-off bankers hadn’t thrown in with trump in hopes of deregulation their portfolios would still be slowly climbing up with the DJIA under a democrat instead of flopping around like a fish out of water under trump.
If ya’ll want another layer of irony to all this:
George Soros initially rose to general public fame/infamy with large bets against British Pound in 1992, that effectively defeated the Bank of England’s attempts to stabilize the currency, resulting in its devaluation, and something like a billion $ profit for Soros.
Fast forward to now, and Trump supporters have spent the last 5 or 10 years acting like Soros is secretly the most underhanded and influential ‘world controller’ bogey man that exists, and they blame everything they don’t like on being funded by him… despite pretty much all of his charities and funds and causes he donates to being publically available knowledge… and despite Soros being a fairly small fish in the modern ocean of much, much more wealthy and infuential corporations and individuals.
… So, now, Trump very well may have done basically the same thing as what Soros did 3 decades ago: force the devaluation of the USD and cause economic mayhem, but… at a much, much larger scale than Soros did.
The Trump supporters have utterly and entirely lost their own plot, that they themselves mostly fabricated.
Soros gets blamed not because he is a democratic billionaire, but because he’s a [[[certain kind]]] of democratic billionaire.
After the fall of the USSR he was a major funding source for anti-corruption and pro-democracy efforts that disempowered Russian interests in several countries. White supremacists sharing Russian propaganda back then is where the conspiracy theory started, at least in the US.
His charities helped a lot of liberal politicians in Eastern bloc states start their careers by providing education and funding.
Including one Viktor Orbán.
accidentally drops my latkes on the floor
Wait, what ever could you mean?
Because every accusation from them is a confession. They didn’t yell at Soros because they hated what he did, they were just jealous.
Nothing will meaningfully improve until the rich fear for their lives
Desperation is unlikely to produce meaningful improvements
We got powerful armed unions after the Ludlow massacre/10 day war, and workers rights/min wage/40hr work week after triangle factory fire and the ensuing riots.
Blacks got the right to vote after the death of MLK and the ensuing riots and organized violence of the Black Panthers.
It’s sad how suppressed our educations are in this police state of a country.
Why not?
“The fear is the U.S. is loosing its standing as the safe heaven” ? Looking at it from the E.U., it’s already gone with no going back. The U.S. looks more and more like a self destructing failed state, that only needed a little nudge from foreign troll factories.
I can heartily say as an American I have no faith whatsoever in this country and wish all the best in the world to the Canada-Europe-Japan conglomerate to be the only possible beacon of hope on the planet.
They (trump, republican toadies billionaires ,etc) have no faith whatsoever in this country either. that’s why they’re grabbing everything they can, selling the country for parts and fucking off to Greenland.
Ya think? This is the end of American Hegemony.
All it took was electing one spoiled rich asshole with an inferiority complex.
Also one of the dumbest motherfuckers, if not the absolute stupidest, to ever sit in government.
But he didn’t happen by accident, he’s the result of mind-numbing, stubborn, continuous anti-intellectualism people have reveled in in their idiotic decadence for years now.
Excuse me we elected him twice.
And hundreds of congresspeople to support his actions, and a previous string of spoiled rich assholes long enough to appoint a supermajority of spoiled rich assholes to your supreme court.
This shit-show has been a long time in the making.
How’s the market for booze, bullets, and bread going?
Don’t know about booze, bullets and bread, but there does seem to be alot of folks taking up smoking again. Altria stock has shot up like a rocket over the last 12 months.
Huh. I don’t know anything about Altria. Wonder if they’re capitalizing on nicotine packets and vapes.
They are, among every thing else tobacco related.
They are, to the tobacco industry, what TTI is to power tools. Among the companies they own are Philip Morris (Cigarettes, Cigars and pipe tobacco), US Smokeless (dip, snuff and whatnot), and NJOY (vaping).
Well I mean… Gestures at everything
There’s a story floating around that Canada’s PM, Mark Carney, may have initiated this threat so that Trump would back off on his tariff escalation.
Dude is an absolute genius to go this route and the perfect person to be Trump’s foil.
If Canada doesn’t elect him, they are bigger fools than us Americans. The dude just chilli-whipped us.
I saw this synopsis a little bit ago and I thought it was a pretty good short description
When US policy can change in hours, based on the whims of a madman, it’s not exactly difficult to see why people lose faith in that stability. Investors want long term stability, and right now things are complete chaos.
Can’t believe the president who has repeatedly floated the idea of defaulting on government debt to save money would provoke this response.
