Hello,

“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 would like to come back as the bond market. You can intimidate everybody.” – James Carville, Bill Clinton’s political adviser.

 

Though they are regarded as the safe (and less-exciting) alternative to equities, sovereign bonds have an enormous impact on global economies. Their yields are the leash that governments are held on. Rising bond yields make it costlier for governments to borrow, therefore making it more difficult to spend.

 

In case you haven’t heard, the US has borrowed a lot, to the tune of $36 trillion. In 2025, approximately $7 trillion of that debt needs to be paid. If it cannot be paid in full (which is an extremely rare occurrence), the US government will need to refinance it at the prevailing rate.

 

So, while US PresidentTrump showed a certain level of indifference to historic falls in equity prices following “Liberation Day”, urging the public to “be strong, courageous, and patient”, he may have been quietly pleased that yields were falling too. That was until the beginning of last week, when long-term treasury yields began to skyrocket, leading Trump to abruptly switch his stance – adding further credence to James Carville’s wit.

 

As always, if you wish to discuss anything in further detail, please do get in touch.