Normally, investors rush into Treasurys at a whiff of economic chaos but now they are selling them as not even the lure of higher interest payments on the bonds is getting them to buy. The freak development has experts worried that big banks, funds and traders are losing faith in America as a good place to store their money.
“The fear is the U.S. is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.”
That could be bad news for consumers in need of a loan — and for President Donald Trump, who had hoped his tariff pause earlier this week would restore confidence in the markets.
It definitely is. If bonds don’t sell, or at least no longer sell cheap, then the US might get bigger problems with their budget.
If US Bonds are no longer the de facto safe haven asset…
The USD is no longer the world’s de facto reserve currency.
That means that even if all the tariffs were rescinded, Trump croaked and somehow JD Vance took a ‘be at least somewhat more competent and less stupid’ pill, and never reinstated them…
Well it would mean the dollar would crash against other currencies, we wouldn’t be able to import anywhere near as much, and US international debt payments as a percentage of the yearly budget would climb fast.
… And then that could spiral into both massive austerity at home, and/or ‘lol we are defaulting on our international debt’ either by formal declaration, or… basically hyperinflation.
That means that even if all the tariffs were rescinded, Trump croaked and somehow JD Vance took a ‘be at least somewhat more competent and less stupid’ pill, and never reinstated them…
It’s too late for that. The US has shown that any appearance of stability can be upended at the whim of whatever singular person is president at the time, and there are no systems in place to prevent that. The idea of “checks and balances” has been shown to be a lie.
Trump signed a trade agreement with Canada and Mexico last time he was president and immediately violated them at the start of this term. He’s been constantly back and forth on tariffs with no warning. The word of the US has become completely worthless.
It doesn’t matter if all Republicans suddenly realize “this is bad”, remove Trump, and put someone stable in his place. The world had been shown that regardless of how stable the current president is, in 4 years the citizens could vote for a complete idiot (and I remind you Trump did win the popular vote. The citizens voted for this) and the market is in turmoil again.
Other countries aren’t unstable idiots of course and aren’t going to tear up existing agreements (because they value stability) but they sure as fuck won’t be renewing any contracts (at least not without far less favorable terms for the US and escape hatches incase another idiot is put in charge) and will be making contracts with other nations instead.
Trump has killed the US and a financial superpower, the US just doesn’t know it yet. It won’t be felt until existing contracts expire and new ones are signed.
No disagreements, no notes.
We (USians) are completely cooked, totally fucked.
We’d have to erect a new government, and then actually demonstrate stability for a decade or two… to begin to be able to undo Trump’s damage, to be treated as anything other than basically a rogue nation that also has the world’s… either the first or second largest/most powerful military.
I can only hope some more civilized places may begin to more seriously consider Americans seeking asylum… though I of course completely understand why they wouldn’t.
That’s not what happens in this scenario… Those aircraft carriers and F35s get activated.
Oh sure, here, buy our aircraft carriers and aircraft that even we can barely understand our own logistics and and maintenance supply lines and procedures for, that will all nearly mmediately break if they stop getting software updates.
Like, I hear you lol, but its kinda like saying ‘sell your literally custom made hyper car that will depreiciate by 80% in value and the parts manufacturer will go out of business when you buy the car.’
I am saying you’d have to be an idiot at this point to buy one, we wouldn’t be able to sell them at this point.
Now I am all for downsizing the military in general, have been for basically all my life since middle school… but uh yeah, that would look more like decommissioning and downsizing.
But uh also also, the military industrial complex are basically the only domestic manufacturing jobs we really have, aside of our shitty overpriced domestically assembled but internationally owned and sourced consumer cars… and the Trumpublican party is, you know, in charge, what with the fascist coup and all that.
You sound smart.
You can pack your stuff and see yourself out or you can roll the dice with our staff of 19 year old tuff bois.
republicunts plans to finance rich people tax cuts with additional debt in shambles
Bond sales are only politically connected to the budget; not financially. Not selling bonds would in no way hinder congress from passing a budget.
I’m no expert but it seems to me if the yields have to go up to get buyers, it’s like raising the interest rates on a loan. You can still get the loan but you have to buy less car/house if you want to afford the payments.
You’re mostly right.
Most T Bills and Bonds… they don’t work like a credit card or a home loan.
Those are things you pay a bit on every month, and the interest rate is an APR, which means Annualized Percentage Rate, which means the monthly interest rate you are paying is the APR divided by 12.
So with those, the bank gets money every month untill you pay it all off.
With Bonds… say a 5 year Bond… you pay for the Bond, newly issued by the US govt, and 5 years later, you hand it back to them, and they pay you the face value + interest rate.
But, people who have already bought a bond, well they can sell it again, before it matures, to… some other guy, some other country, some other firm.
Thats called the ‘secondary market’, and most of the time you hear a news story about bond prices and yields, its a second party selling a bond to a third party.
Generally, when the US does an issuance auction of new debt directly… well, it has to generally track the prices and yields set by the various secondary markets, sorta like how you’d wanna check a car salesman’s price against kelly blue book to make sure you’re getting a reasonable deal.
There were moments in thr GFC, 07 08 09, where US debt auctions … didn’t actually result in the amount of bonds expected to sell, actually selling, because there were enough potential bond buyers who assessed that the US was offering unreasonable prices and yields, given the economic turmoil.
… I am not an ‘expert’ either, but I do actually have a BSc in Econ, and I apparently remember a good deal of my courses, and enjoy infodumping lol.
Not really. US debt is held in those bonds, and it is a perpetual game of selling and repaying them. If they don’t sell anymore, the old ones have still to be repaid - or default. You don’t want to experience this.
The “debt” of a monetarily sovereign state is really nothing like the debt of a household or business. The US could pay off all its debt in an instant by an act of Congress. Not saying that would be a good thing, but there are no financial constraints stopping Congress from doing that; only political ones.
The prices and yields of bonds have an inverse relationship:
If price goes down, yield goes up.
The yield is also known as the interest rate.
This interest rate * the purchase price is paid by the US government to the bondholder at the end of the duration of its term.
When you look at the US Federal budget, and see the amount that goes toward making debt payments…
This, bonds, are a very big part of what you are looking at.
If the interest rate on US debt instruments are going up… that means more and more of the budget has to be allocated toward debt repayment.
While yes, extremely directly, bond yields rising doesn’t… mechanically make the passing of a budget impossible in some kind of procedural way…
It very much makes the stakes higher as now our growing debt problem is growing even faster.
