US President Donald Trump paused the administration’s tariffs after the bond market reacted strongly against them, with investors expressing concerns over fiscal recklessness and harm to their portfolios. The $2.8 trillion Treasury market, which finances the US government’s debt, saw a significant increase in yields as investors dumped stocks and bonds.
Experts warn that the surge in bond yields poses serious financial risks for the nation, particularly if interest rates rise further. With the stock market already reeling from the tariffs, the turmoil in the bond market could create an expensive problem for the federal government, especially as it pushes Congress to pass an extension of its 2017 tax cuts.
The bond market’s reaction was swift and decisive, with bond prices falling and yields rising by up to 0.3 percentage points in one day. Economists point to the potential impact of Trump’s tariffs on global financial markets and the risk of a recession and inflation. The pause is seen as a recognition that the bond market was “getting a little queasy” about the administration’s policies.
The term “bond vigilantes” was coined decades ago to describe investors who express disapproval by dumping Treasuries, which is exactly what happened in this case. Economists note that while Trump may have resisted the stock market’s initial reaction, the bond market’s strong word for him on tariffs ultimately forced his hand.
Source: https://www.cbsnews.com/news/trump-tariff-pause-bond-market-bond-yield-treasury-bill