Mint Quick Edit | Trump versus the mighty US bond market
Subscribe to enjoy similar stories. Former US president Bill Clinton’s aide James Carville once said, “I used to think that if there was reincarnation, I wanted to come back as the president or the Pope or as a .400 baseball hitter.
But now I want to come back as the bond market. You can intimidate everybody." Whether that includes Donald Trump, who doesn’t appear to fear a bond-market rout, is perplexingly unclear.
Yields on US 10-year Treasury bonds seem headed for 5% on the back of a price-reducing (and thus yield-raising) sell-off in response to the next president’s policy ideas that may prove inflationary. Wage-inflating labour shortfalls and tariff-led price mark-ups are worries.
If tax cuts widen the fiscal gap, it’ll only worsen price instability. In the International Monetary Fund’s analysis, although tariffs, tax relief and deregulation could boost the US economy in the short-term, an inflationary boom could be followed by a potential bust, and the global role of US Treasury bonds as “safe assets" might weaken.
Meanwhile, though, high bond yields would make credit costlier globally and keep foreign investors off Indian assets. That’s reason enough for us to watch—if not fear—the mighty US bond market.
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