The historical turbulence in US state bonds has moved Trump to a customs of the turn. However, the president has gambled a lot of trust in the markets – that could still take revenge.
What is behind Trump’s radical swivel in trade policy? This question has been moving since yesterday. Was it the insight that his customs policy had the potential to push the global economy into the abyss? Or was it the pressure from Elon Musk and other company bosses? What role did the brutal crash of the US stock markets play?
In fact, Trump obviously looks at stock exchange courses – the stock crash on Wall Street should therefore not have left the president cold and favored his change in opinion.
Bonds are considered “safe haven”
However, the situation on the bond markets may have been far more worrying for the US President. Because usually US state bonds are considered a “safe haven” for investors who are typically visited in phases falling stock markets.
In the case of turbulence on the stock markets, investors find refuge here: the money flows out of stocks and in bonds. This in turn means that the courses for government bonds rise – and in return the returns drop. As I said: normally.
Falling stock and bond courses a “toxic combination”
Because this “stock market rule” had obviously overridden Trump with his gigantic customs package. The courses on the US bond markets rushed into the depths in the early trade yesterday – parallel to the collapsing share courses. A warning signal for stock market experts: the “Sell America” scenario is becoming tangible again, warned Ing strategist Francesco Pesole.
Paul Diggle, chief economist of the British asset manager of Aberdeen, also showed himself alerted: “Falling share prices, a weaker US dollar and at the same time increasing borrowing devices represent a toxic combination. In every other country, this would probably be described as a state crisis.”
Retite rising is more borrowed for the United States
However, far more worrying than the absolute height of the returns on the bond markets was the brevity of the time when this increase took place – and its extent. The return of the ten-year US state bonds in early US trade shot at 4.5 percent in early US trade after falling to 3.9 percent on Friday.
The increase in bonds with a 30 -year term was even clearer: since Friday there have been around 0.7 percentage points – from 4.3 to 5.0 percent; And with it as strong as it has been since 1981.
In other words, investors now asked for higher interest rates, i.e. higher risk surcharges, for binding their money over longer terms. A risky development for Trump and the US administration: higher bonds make borrowing more expensive for the state. After all, government bonds are nothing more than guilt papers that the state outputs to finance its expenses.
US debt ratio With over 120 percent
The US’s public debt in absolute numbers is the highest in the world. It is currently almost $ 37 trillion. If you want to know exactly, you can watch the debt level live at US National Debt Clock.
Under Trump, the increase in US state debt is likely to accelerate again, the Republican is planning far-reaching tax relief. According to data from the International Monetary Fund (IMF), the debt rate (amount of total debt in relation to the gross domestic product) of the United States in 2025 is likely to increase. This means that only seven countries worldwide would be in debt than the United States. For comparison: For Germany, the IMF expects a debt rate of 62.1 percent this year.
The United States is therefore dependent on low interest rates on its government bonds in order to be able to finance its debts in the future. Finance Minister Scott Bessent had recently said hope that the returns could decrease by the Trump customs policy. But the markets did not play along. Only who actually sold here?
What role did hedge funds and China play?
According to a report by the Reuters news agency, there were also hedge funds behind it, which bet on the small price differences between the courses in the government bonds and the associated concepts. In the industry jargon, this is referred to as the “basic trade”. In view of the market turbulence, the hedge funds were forced to sell to reduce their risk and quickly get liquidity.
On the market, however, it was also speculated that China could sell part of its US state bonds – as a counter -reaction to the drastic import duties on its goods. According to data from the US treasure office, China recently held government bonds of $ 760.8 billion and, according to Japan, was the second largest foreign creditor in the United States.
China is the second largest creditor in the United States
The fact is: The United States is dependent on the refinancing of its debts on donors from abroad. And the fact is: The countries with which Trump has caught up are also the largest creditors in the United States at the end of the day, especially Japan and China.
Trump’s sudden reversal in his customs policy is an impressive proof that Trump may not sit on the longer lever in the game he initiated “We against the rest of the world”. Did the Republican ultimately make the bill without the US donors?
Has Trump gambled too much trust?
In addition: Trump has massively gambled trust in the financial markets on the financial markets in the past few days – the only currency that ultimately matters here. That could take revenge in the future.
The risk of recession for the United States has immediately decreased somewhat again through Trump’s U -U -turn in customs policy. But “the high uncertainty from the Hüh and Hott of customs policy has considerable costs”, underline the Commerzbank economists Bernd Weidensteiner and Christoph Balz. Companies would not have a secure planning basis and put investments back. “This increases the economic headwind.”
In combination with a little predictable policy under Trump, weaker growth of the United States should cause doubts about the long-term load-bearing capacity of US state debt. Investors and creditors could question the United States’ ability to serve their debts. And once this spirit is out of the bottle, it should be difficult to capture again.
