You may not know much about bond markets — but you should, especially under Trump 2.0. Bond investors could make Trump's life much more difficult.
You may not know much about bond markets — but you should, especially under Trump 2.0. Bond investors could make Trump's life much more difficult.Donald Trump arrives to speak during an election night event in West Palm Beach, Fla., on Nov. 6, 2024. Bond investors have reacted with concern to Trump's economic policies as he gears up to start a new term at the White House.From sweeping tariffs to big tax cuts, President-elect Donald Trump has an ambitious economic agenda.
That gives bond investors big influence — and they can use to it to try to hold governments accountable and force them to reverse their economic policies. The market even has a term for investors who exert pressure in this manner: bond vigilantes.Here's how bond markets work — and why you'll need to pay attention to bond vigilantes as Trump gears up for a new term.Bonds are essentially like loans. The government needs to borrow money to function and to afford all of its spending.
Changes in bond prices affect the interest due on that bond. It's a simple rule: Bond prices and yields move opposite from each other. When bond prices rise, their yields fall, meaning investors are happy to accept lower interest payments.But when bond prices fall, their yields rise, since investors demand more interest as compensation.The U.
Those rising interest payments can make the country's deficits even worse. In the last fiscal year, which ended Sept. 30, the budget deficit hit $1.8 trillion — the third highest in U.S. history.Stocks and cryptocurrencies have risen because those investors see a lot to like in Trump's promise to boost economic growth. His promise to lower taxes, for example, could help boost corporate profits and spur more investments.But bond investors have reacted with alarm.
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