All posts tagged "bond market"

Bond vigilantes call Scott Bessent's bluff after failed fix turns into 'five-alarm fire'

Two news anchors reacted with alarm to the global bond selloff and mocked the Trump administration's failed response.

On Tuesday, CNN anchor Erin Burnett and Richard Quest, the host of Quest Means Business, explained what's happening in the global bond market and why it spells trouble for major economies.

Burnett described how "turmoil" like the war in Iran has led to "meaningful economic impacts, and people experience them every single day." Referring to a global bond selloff, Burnett explained, "something happened today in the market that was sort of a five-alarm fire when it comes to where things are going."

"It's very concerning because it's the markets telling governments, not just in the United States but also in Europe and in Japan, that their fiscal path is unsustainable," Quest said.

Quest explained that investors known as "bond vigilantes" are behind the global selloff, adding that they only "come out of the woodwork when they see government debt or even corporate debt" that they think is unsustainable.

"They basically ratchet the price down and the yield up," Quest explained. "That's not fine for a company, but that's only a company. In this case, we're talking about the U.S. government debt."

Quest noted that Treasury Secretary Scott Bessent tried to quell the turbulent bond markets a couple of weeks ago, but that "seems to have failed because rates are back where they were. The market is basically saying they don't believe what this administration is planning to do."

Burnett flagged that as "a hugely significant thing to say" because the Treasury Secretary, along with the Federal Reserve chairman, are people who "the markets have taken very seriously."

She also played a clip of Bessent saying, "The U.S. bond market has been the best-performing market since the president came in," which was met with laughter by Quest.

"He was trying to move the price rather than the fundamentals," Quest said, explaining Bessent's failure. "The best analogy that I can give you for that quote from Bessent is that famous line, 'the cleanest dirty white shirt in the laundry,' and that's what the U.S. is."

'Addled' Trump viciously mocked after flub: 'Bond market also two weeks away from a nuke?'

President Donald Trump's threat to use military intervention to handle the troubled bond markets is baffling his online critics.

On Friday, a reporter asked Trump about increasing bond yields, which Treasury Secretary Scott Bessent has struggled to contain after a failed debt buyback intervention earlier this week.

"Have you talked to Bessent about another type of intervention?" a reporter asked Trump.

"The ultimate intervention is our military," Trump responded. "And if we have to use that, we will."

The response from Trump prompted mockery as he seemed to conflate military intervention with a bond market intervention.

"Addled Trump threatens to use the military on bond traders," reacted Ron Filipkowski, the editor-in-chief of the political news network MeidasTouch, in a post on X.

"Is the bond market also two weeks away from a nuclear weapon?" asked Acyn Torabi, the senior digital editor for MeidasTouch, referring to reports that Trump was weighing a possible nuclear strike against Iran.

"Operation Epic Interest Rates," suggested political blogger and Kash Patel foe Jim Stewartson.

"Is Trump going to bomb the bond market?" wondered PatriotTakes, which covers right-wing extremism.

"I preferred it when yield curve control didn't involve the military," economist Justin Wolfers lamented. "But perhaps mine is a radical position."

During his comments, which came ahead of a South Carolina rally for Sen. Darline Graham (R-SC), Trump also pinned the initial debt buyback to Bessent as bond yields climbed shortly after the buyback.

"Did you direct Secretary Bessent to intervene in the bond market?" a reporter asked Trump.

"No, not at all," he responded. "He's a very capable man. He wanted to do it. He's very good at it. He's got a good touch for bonds and interest rates. He did it."

The question came shortly before he was asked about considering another intervention, but Trump still pivoted to talking about military force.

Wild gaffe as Trump threatens to unleash military on sluggish bond market

President Donald Trump on Friday answered a reporter's question about calming the turbulent bond market by saying he'll use military force.

Trump was asked whether he had spoken with Treasury Secretary Scott Bessent about "another type of intervention" after bond yields climbed back to multi-year highs.

"The ultimate intervention is our military," Trump said. "And if we have to use that, we will."

The remark came as Trump seems to be escalating his military posture against Iran. Bessent told CNBC on Thursday that the U.S. likely would not need to restart large-scale combat with Iran, hours after Trump declared "economic D-day" on the country.

It also came shortly after Bessent announced that the Treasury would buy back far more of its own debt than planned. The step was meant to push interest rates down, according to reporting by CNBC. The Treasury acted after the rate on the government's 30-year bond hit its highest levels since 2007, Reuters reported.

Trump distanced himself from Bessent's move during his comments to reporters on Friday. Trump said he had not directed the intervention.

"No, not at all," Trump said. He added that Bessent is "a very capable man. He wanted to do it."

Bessent's fix barely lasted a day. Rates quickly climbed back to where they started after Trump escalated his standoff with Iran and drove oil prices higher, according to reporting by CNBC. The nation's total debt topped $40 trillion for the first time shortly after, which fueled investor anxiety over rising borrowing costs and deepening deficits, Reuters noted.

The Iran war is now in its sixth month. Trump has faced questions about how far he is willing to go. The Telegraph reported earlier this week that Trump was weighing a possible nuclear strike, a claim amplified by former Rep. Marjorie Taylor Greene, who said the administration had discussed the option in strategy meetings.

‘Radioactive’: White House insiders ‘freaked out’ as Fed chief probe spooks key market

White House insiders were reportedly reeling Monday as President Donald Trump's Department of Justice launched its investigation of Federal Reserve Chair Jerome Powell, prompting anxiety over financial market disruptions.

The Trump administration was apparently in "damage-control mode" after the news heightened over the DOJ's criminal probe announcement that alleges Powell lied about the scope of renovations at the Fed headquarters, Politico reported.

"Privately, some White House officials see the episode as radioactive, with aides and allies eager to distance themselves from a probe they believe could do more damage to the White House than to Powell," according to Politico. "One of the five people familiar said some inside and close to the White House are 'freaked out' that a further threat to the Fed chief’s job security could spook the bond market."

The White House was reportedly working to distance itself from the investigation as Press Secretary Karoline Leavitt told reporters Monday that the Trump administration was not aware of the investigation and that president did not prompt the DOJ to initiate the subpoenas.

"And given the Fed’s role in keeping a lid on inflation, the decision to target Powell in a criminal probe risks eroding Wall Street’s confidence in Trump’s economic agenda and the central bank’s credibility at a time when the president faces serious political challenges over his handling of the economy before the midterm elections," Politico reported.

Powell has pushed back on President Donald Trump's pressure over lowering interest rates. He issued a defiant response in a video statement on Sunday, responding to the president's most recent revenge attack. Trump's other retribution campaigns have targeted Federal Reserve Governor Lisa Cook, FBI Director James Comey and New York Attorney General Letitia James.

“I have deep respect for the rule of law and for accountability in our democracy. No one—certainly not the chair of the Federal Reserve—is above the law,” Powell said. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”

'The most powerful check on Trump' isn't Congress or the courts: analysis

In a perfect world, Congress and the courts would keep President Donald Trump's executive branch in line by balancing out his portion of the country's power base. Absent their effectiveness, the financial markets may be the last line of defense to moderate Trump's behavior, according to new analysis in The Bulwark.

Writer Matt Johnson posited that even as these vital institutions cave in to Trump's demands, "one important check remains: There’s nothing Trump can do to bend global financial markets to his will."

As an example, Johnson wrote that Trump's tariffs and the resulting stock market chaos were somewhat quelled last week when Trump was "bullied into submission" by the bond market. Trump announced that he was backing off his trade war because people were "getting yippee," but a massive sell-off in U.S. bonds led a CNN analyst to call it a rare economic "red flag" that even Trump couldn't ignore.

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Allison Morrow, a senior writer for CNN Business, said last week that "Normally in times of economic turmoil, we would see stocks sell off and investors go to bonds. That didn't happen. We saw investors selling stocks and bonds. And that is really a red flag because it's only happened a handful of times in history and its a signal that investors can't really see which way the economy is going."

In Johnson's Bulwark article, he called it "a sad commentary on the decay of America’s democratic institutions that the market is now the most powerful check on Trump. While financial markets are subject to manipulation and can be captured by both irrational exuberance and irrational fear, they are usually extremely efficient information processors."

Johnson continued, "Markets are a proxy for what people really believe is true about the world—MAGA members of Congress can spout all the familiar pro-Trump slogans about a golden age for America, but the real measure of the public’s confidence in Trump’s economic stewardship is how they adjust their portfolios. Markets provide immediate feedback on Trump’s actions. They can’t be flattered or pressured. They can’t be swayed by alternative facts."

Read The Bulwark article here.