A broker is seen under the board of the DAX (German stock market index) at Frankfurt's stock exchange September 10, 2001.File Photo
President Donald Trump can brag all he wants about the economy and make the biggest boasts at campaign stops, but Bloomberg says Wall Street investors just aren’t buying it.
“Traders are scrambling to shield their portfolios against further losses in Treasuries, as worries over the budget deficit and inflation push yields toward multiyear highs,” reports Bloomberg.
“Right now, it’s difficult to see a change in fortune for bonds,” said David Roberts, head of fixed income at Nedgroup Investments. “Certainly, a long-term solution to the Iranian situation would help.”
But that’s not coming, by the look of things, and investors are rushing to shore up what looks like a terrifying floor rattle involving U.S. treasury investments, prompted by Trump’s soaring debt and bad policies.
“The rush to hedge comes on the back of a global slide in bond prices, which are being squeezed by a range of catalysts including ongoing fiscal challenges and a war-fueled oil price surge that has further stoked inflation fears,” reports Bloomberg. “Investors have been particularly keen to avoid longer-dated tenors, which are more sensitive to inflation risks: The 30-year yield has averaged 4.96 percent year-to-date, on track for the highest annual level since 2004, according to Bloomberg data.”
It also appears investors have no faith in the once respected words of Treasury Secretary Scott Bessent, whose reputation appears to have taken a nosedive since he started working for Trump.
"Within days of Mr. Bessent’s confirmation, at least, it was obvious this was a misjudgment," The Bulwark's economics editor Catherine Rampell told The New York Times last week. "… Now, after criticizing his predecessor for allegedly trying to juice the economy ahead of an election, Mr. Bessent appears to have attempted exactly that.”
Bessent announced that the U.S. Treasury would ramp up repurchases of its long-term government bonds to reduce their interest, in an effort to save Republicans from a grueling midterm race.
“But Bessent’s plan backfired. Instead, after a brief dip, bond rates rose," Rampell said.
“Investor unease over bond prices has persisted even after Treasury Secretary Scott Bessent announced expanded buybacks last month in an effort to keep yields contained,” confirmed Bloomberg. “Options skew on long-bond futures, which is favoring puts, shows that traders are starting to pay a higher premium for hedging a bond market selloff over a rally.”
“Bond anxiety will likely persist at the long end, not the short end that the Fed controls,” Ashok Bhatia, CIO and global head of fixed income at Neuberger Berman, told Bloomberg.
