{"id":40845,"date":"2025-04-10T16:33:00","date_gmt":"2025-04-10T21:33:00","guid":{"rendered":"https:\/\/ustower.net\/?p=40845"},"modified":"2025-04-10T22:34:43","modified_gmt":"2025-04-11T03:34:43","slug":"why-trump-and-others-are-worried-about-the-bond-market","status":"publish","type":"post","link":"https:\/\/ustower.net\/?p=40845","title":{"rendered":"Why Trump and others are worried about the bond market"},"content":{"rendered":"\n

President Trump\u2019s\u2002<\/u><\/a>tariff plans have raised jitters about the stability of the bond market as demand quickly dropped before he implemented his 90-day pause on most tariffs. <\/p>\n\n\n\n

Trump referenced the bond market<\/u><\/a> in his Wednesday remarks explaining his decision to institute the pause, seeming to note the drop in demand for U.S. Treasurys that have generally been considered to be stable during financial chaos and a big jump in interest rates. <\/p>\n\n\n\n

Economists have said the bond market\u2019s movement may have given even more reason for concern than the drops in the stock market over the past week. But the market has begun to stabilize, at least for now, with most of the tariffs delayed. <\/p>\n\n\n\n

Here\u2019s what you need to know about concerns over the bond market. <\/p>\n\n\n\n

What is the bond market?<\/strong> <\/strong><\/strong><\/h2>\n\n\n\n

Put simply, the bond market is where bonds, which are loans or IOUs, are bought and sold. For U.S. Treasurys, the federal government sells bonds throughout the world that individuals, companies or other governments buy in exchange for being paid back with interest after a certain amount of time. <\/p>\n\n\n\n

The Treasury Department also holds regular auctions of Treasury bonds with various maturities, the primary way the U.S. government finances the national debt. <\/p>\n\n\n\n

The interest gradually builds until the bond reaches maturity, and the buyer can then receive back their full promised amount.<\/p>\n\n\n\n

The buyer can cash their bond early and receive their money back with less interest than they would receive if they waited. Or the buyer can sell their bond to another party to receive a payout immediately, allowing the third party to take ownership of the bond and receive the original cost of it and the interest once it reaches maturity. <\/p>\n\n\n\n

The price and interest rates for an individual bond depend on various factors like positive or negative news about the issuer, but interest rate changes and perceptions about how they may change are the most influential at determining returns at a higher level, according to the investment management firm Vanguard<\/u><\/a>. <\/p>\n\n\n\n

When interest rates rise, buying a new bond is more appealing than buying someone else\u2019s bond that is making them less money than a new one would. <\/p>\n\n\n\n

How has the bond market reacted to Trump\u2019s tariffs?<\/strong> <\/strong><\/strong><\/h2>\n\n\n\n

Trump acknowledged that people<\/u><\/a> seemed to be getting \u201ca little bit yippy, a little bit afraid\u201d in response to the news of his tariffs, which caused the stock market to drop hundreds of points over several days. But he pointed specifically to the bond market as demand for U.S. Treasurys dropped and interest rates saw a steep increase. <\/p>\n\n\n\n

\u201cThe bond market is very tricky, I was watching it. But if you look at it now it\u2019s beautiful,\u201d Trump said. \u201cI saw last night where people were getting a little queasy.\u201d <\/p>\n\n\n\n

Some experts said the disruption to the bond market may have been the main reason that Trump decided to change course. <\/p>\n\n\n\n

\u201cThe intellectual underpinning of the Trump tariff agenda is that the dollar would rise and the bond market would rally, which would offset some of the negative impact of higher tariffs and higher costs,\u201d said Brian Gardner, the chief Washington policy strategist for the wealth management and investment banking company Stifel. \u201cAnd that\u2019s not what was happening.\u201d <\/p>\n\n\n\n

Gardner said the value of the U.S. dollar internationally was weakening and borrowing costs were rising for Americans, \u201cthe very people that they intend for the tariffs to help.\u201d <\/p>\n\n\n\n

He noted that the stock market seemed to react well to Trump\u2019s pause, but the bond market could benefit the most as it had been potentially more vulnerable. <\/p>\n\n\n\n

\u201cThat is where some signs of stress had started to appear,\u201d he said. <\/p>\n\n\n\n

Why have Trump, economists expressed concern?<\/strong><\/strong><\/h2>\n\n\n\n

The main reason why observers were so stressed is because the shifts in the bond market typically haven\u2019t been seen during economic downturns or stock market dips. <\/p>\n\n\n\n

Greg Ip, the chief economics commentator for The Wall Street Journal, noted in a column for the outlet<\/u><\/a> that Treasury yields, the amount that bond purchasers make on a bond they\u2019ve bought, were up about a quarter-percentage point since April 2, when Trump first announced his latest and most wide-ranging tariffs. <\/p>\n\n\n\n

In the past seven instances where the S&P 500 fell by as much as it did or more, the dollar\u2019s strength rose, he said. But this time, the dollar dropped, and the yield rate rose sharply Tuesday evening and Wednesday morning. <\/p>\n\n\n\n

Mark Hamrick, the senior economic analyst for the financial services company Bankrate, said a spike in the yield of the 10-year Treasury note \u201cset off alarm bells.\u201d He said the past few days saw a \u201cflight\u201d from U.S. assets around the world. <\/p>\n\n\n\n

\u201cWe have to acknowledge that with historically high tariffs, which are still the case as we speak \u2026 that there may be both intended and unintended consequences of a trade war in which the U.S. doesn\u2019t hold a monopoly in firing the shots,\u201d he said. <\/p>\n\n\n\n

Ip said the U.S. needs foreigners to continue with their bonds and buying news ones, as even a small reduction can cause yields to jump. He noted some concern that China, which is still facing a 145 percent tariff<\/u><\/a> on all imports to the U.S., could sell some of its bond holdings as retaliation. <\/p>\n\n\n\n

\u201cThere is no evidence that it has, but the possibility has highlighted the risks to the U.S. of a trade war morphing into financial war,\u201d he said. <\/p>\n\n\n\n

Should the average person be worried?<\/strong> <\/strong><\/strong><\/h2>\n\n\n\n

The most direct outgrowth of the impacts on the bond market is the potential for interest rates to go up, increasing the cost of borrowing money for consumers. <\/p>\n\n\n\n

\u201cThe administration came in with an agenda to tame inflation, lower prices,\u201d Gardner said. \u201cWell, if borrowing costs are rising, you\u2019re not taming inflation.\u201d <\/p>\n\n\n\n

Rising interest rates can lessen the value of other investments like certificates of deposit or money market savings accounts. <\/p>\n\n\n\n

Hamrick said one of the safe moves to make during instances of economic uncertainty is to prioritize emergency savings. <\/p>\n\n\n\n

\u201cOur Bankrate surveys historically have found that majority of Americans live paycheck to paycheck,\u201d he said. \u201cAnd in an environment where employment, income and inflation may be working at odds with our best financial interests, having more money in the bank \u2026 you\u2019d rather have some money getting some return than insufficient money getting no return.\u201d <\/p>\n\n\n\n

He said the interest rate environment and monetary policy are \u201chighly uncertain,\u201d but interest rates could remain relatively stable in the long term. <\/p>\n\n\n\n

\u201cBut we\u2019ve seen some volatility in rates and predicting the future outlook for those is difficult,\u201d Hamrick added.<\/p>\n\n\n\n

thehill<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

President Trump\u2019s\u2002tariff plans have raised jitters about the stability of the bond market as demand quickly dropped before he implemented his 90-day pause on most tariffs.  Trump referenced the bond market in his Wednesday remarks explaining his decision to institute the pause, seeming to note the drop in demand for U.S. Treasurys that have generally been considered […]<\/p>\n","protected":false},"author":6,"featured_media":40846,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1155],"tags":[24860,32465,1230],"class_list":["post-40845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-bond-market","tag-tariff","tag-trump"],"_links":{"self":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/40845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40845"}],"version-history":[{"count":1,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/40845\/revisions"}],"predecessor-version":[{"id":40847,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/40845\/revisions\/40847"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/media\/40846"}],"wp:attachment":[{"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}