Sat, 19 Apr 2025

Sat, 19 Apr 2025 Why everyone is suddenly so interested in US bond markets

What is happening with US bonds, why Donald Trump cares and how ordinary Americans could be affected.
US Bond Market Turmoil After a period of market volatility caused by US trade tariffs, investors are closely watching the US bond market for signs of stability. The yield on 10-year US government bonds rose sharply to 4.5%, while the 30-year yield spiked at almost 5%. This significant increase is attributed to investors losing confidence in the US economy due to uncertainty over tariff impacts. Why it Matters When the US government borrows money, it issues bonds with interest rates that reflect investor risk appetite. If investors demand higher returns for lending to a perceived high-risk borrower like the US government, it can lead to increased borrowing costs and a ripple effect on other interest rates. Impact on Economy and Households Higher borrowing costs can affect public spending, budgets, and household finances. Businesses may struggle to access credit, potentially impacting economic growth and job creation. First-time homebuyers and those looking to move may face higher mortgage costs. The sudden bond market sell-off seems to have influenced President Trump's decision to introduce a 90-day pause on tariffs for some countries, including Canada, Mexico, and the European Union. International Implications Foreign ownership of US bonds has almost doubled since 2010, with China holding significant stakes in US Treasury bonds. While questions arise about potential Chinese retaliatory measures, analysts believe it is unlikely to spark a debt sell-off.
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