James Carville, a close aide to former US President Bill Clinton, once said: But now I want to get back into the bond market. You can blackmail everyone. ”
Whether that includes Donald Trump, who doesn’t seem to fear a bond market crash, is confusingly unclear.
The yield on 10-year U.S. Treasuries is expected to trend towards 5% as prices fall (and therefore yields rise) in response to the president-elect’s potentially inflationary policy proposals.
Also read: Strange reaction: Why did U.S. Treasury yields rise after the Fed cut rates?
There are concerns about labor shortages due to soaring wages and price hikes due to tariffs.
If tax cuts widen fiscal disparities, price instability will only worsen.
An analysis by the International Monetary Fund suggests that while tariffs, tax cuts and deregulation could boost the U.S. economy in the short term, an inflationary boom could be followed by a potential collapse, leaving the U.S. as a “safe haven” asset. The global role of government bonds could be undermined. weaken.
Also read: The good, the bad, and the uncertainty of the U.S. economy under President Trump
But on the other hand, high bond yields will raise credit costs globally and drive foreign investors away from Indian assets. This is reason enough for us to watch, if not fear, the strong US bond market.
Also read: Key moments for Indian bond market
