The Flip Side Is the US bond market starting to rebel?
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Jun 4, 2025 Global investors are losing interest in long-term U.S. Treasury bonds amid rising interest rates and economic uncertainty. The discussion highlights concerns about the surging bond yields and the implications of increasing U.S. debt levels. Legislative challenges around tax cuts and tariffs also come into play, emphasizing their potential impact on the budget deficit. As bond markets react to shifts in inflation and foreign demand, experts debate whether these high rates are a temporary phenomenon or a long-term trend, hinting at a possible rebellion in the bond market.
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Global Bond Market Rebellion
- 30-year U.S. Treasury bond yields are near their highest since the 2008 financial crisis, indicating rising risk premium demand.
- Long-term bond yields are also at record highs in Japan and the UK, signaling a global bond market rebellion.
Unsustainable U.S. Debt Growth
- U.S. debt is at 100% of GDP and growing due to persistent deficits of 6-7% of GDP.
- This debt trajectory is unsustainable without fiscal adjustments, risking continued debt accumulation for a decade.
Fiscal Projections Rely on Fragile Assumptions
- Extended tax cuts and tariff revenues were priced into markets but rely on fragile political and legal conditions.
- Senate is likely to adjust the bill, and tariff revenues face uncertainty due to legal challenges and potential policy shifts.