Bond investors bet that tariffs will inflict deep damage

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In the initial interview as the US Treasury Secretary in February, Scott Besent made it clear that he and President Donald Trump were the most careful of the financial market rather than the share price of the bond.

Although he did not describe in detail, it is not difficult to guess. The yield of the US bond determines the price for new mortgages. They determine the value and availability of money for most US agencies orrow. And, perhaps most importantly to Trump, the bond markets hold the purse strings to the government.

US stocks have dropped bombs since the interview-New York has dropped by 5 percent in mid-time on Friday. Equity Markets hate uncertainty and have not been deficient since Donald Trump returned to the White House. Tariff flip-floping, reduce the job of public sector, and extensive attacks on polygamy have dropped a dark shadow on the economic view of the government policy. However, prices of bonds have risen, which means the yield has decreased.

This is impressive in the context of the weak global bond market. British, French and German ten -year official bonds have increased in the same period. American exceptions are on their bond market, if their newly sagging equity indicators are not covered.

Furthermore, this exceptions have happened despite high inflation expectations and growing anxious Debt – the traditional bouquet of bond market. Since Besent’s interview, both private sector economists and markets have made their forecasts even more for US inflation. And the neutral Congressional Budget Office does not only expect the growing level of the federal Debt, but also increases the guided path of the federal deficit.

Furthermore Mar-A-Lago Accord What is effectively involved will be a compulsory exchange of Treasury bonds on American allies. The concept was discussed in one Report Stephen Miran wrote before the president of Trump’s Economic Advisory Council. When asked about the idea last week, Miran would simply say that Trump’s focus was on duty. We do not know that the foreign official holdings of US Treasury holdings are owned by its allies, but they are less likely to encourage them to exchange debt.

And nevertheless, there is no lease truss in the US market despite the expectation of growing inflation, the burden of the official debt and the debt exchange.

What does the US government bond explain? Okay, the administration fears and the bond markets are with the news that the flavors tend to taste are with the reduction of yields: the top economic indicators have fallen from a steep. This is because bad economic news begins to be presented at the short -term interest rate, the existing bonds with high yield make the existing more valuable. And they are betting that a weak economy will overwhelm the price of consumer in calculus to determine the rate of Federal Reserve.

The fall on the leading indicators seems to be self-destructively. The so-called “soft data” series-such as consumers’ confidence and production purchase managers reflect the superior uncertainty about survey-economic views. Both the central banker and bond market are closely monitoring the symptoms that more solid economic data will begin to follow soft data in the south.

In a note titled “There will be blood there” on Friday, JPMorgan has increased the estimation of the risk of recession in the global economy this year if the tariff is increased from 40 percent to 60 percent to 60 percent. Since Besent’s February interview, the bond market has paid the price to cut about three additional rates by the Fed.

In view of the dollar dominant role in global trade, treasury bonds have a special place in the balance sheets of the world’s government and agencies not only in global financial driving. It guarantees that if the US economy slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly slowly to slowly slowly slowly slowly slowly slowly. And there will be considerable demand for treasury to maintain financial domination in the United States.

Bond traders cannot imagine that the administration will be so desperate that the compulsory exchange concept is implemented as the dollar reserve currency status. Or at least they are not willing to pay the price. This will be destructive of the loss of so -called excessive rights. Furthermore, these losses will probably extend far beyond the American arrow due to the interconnection of the global financial system. So – perhaps satirically – the investors who have taken refuge from the loss of US tariffs are looking for it in its government’s bond. At least

“Wall Street, where you and I came, it was great”, Besent Stated His interview. “Under this administration, it’s the turn of Maine Street”. Bond markets are betting that the Trump administration is involved in economic self-loss. If this is ok then Maine Street will have to wait.