Trump Faces a Bigger Bully: The Bond Market

Trump Faces a Bigger Bully: The Bond Market

So it looks like Trump might have finally met his match—a bigger bully than himself: the bond market. If you haven’t noticed, the bond market has been flashing red since earlier this week, sending some serious warning signals.

Here’s the situation: normally when stocks crash, you’d expect interest rates on U.S. Treasury bonds to drop. Investors usually flock to Treasuries during times of uncertainty, pushing prices up and interest rates down. But this time? Not so much.

On Monday, despite a stock market plunge, Treasury bond yields spiked. By Wednesday, the 10-year Treasury yield briefly topped 4.5%, while the 30-year yield shot past 5%. That’s way higher than just a few days ago, and it's making a lot of people nervous.

In fact, it seemed to shake Trump into action. On Wednesday, he admitted that the bond market was freaking out about his trade war, and announced a 90-day pause on some of the tariffs he rolled out just a week earlier. For about a day, markets calmed down—stocks surged and yields dropped.

But that calm didn’t last. By today, yields are back up, hovering near Wednesday’s highs. Investors are still worried about Trump’s trade war, especially after the 145% tariffs on China. Those tariffs could severely disrupt trade with one of America’s biggest trading partners, and ripple through the entire economy.

Here's the catch: foreign money traditionally flows into the U.S. to buy assets like stocks, real estate, and Treasury bonds, reinforcing the idea that the U.S. is a safe bet. But now, rising yields are suggesting that foreign investors might be starting to question whether the U.S. is still that safe bet.

And if you thought that was weird—the U.S. dollar is plummeting. Normally, higher interest rates attract foreign capital and strengthen the dollar. But this time, the dollar is falling at the same time that yields are rising. This isn't supposed to happen.

Something is definitely off. The bond market is sending a very clear message, and it’s one that Trump can’t afford to ignore. The message? The U.S. economy’s stability is in question, and that’s a major problem for anyone trying to navigate this unpredictable economic landscape.