Global Bond Rout as Trump Tariffs Take Effect

6 snips

Apr 9, 2025

The podcast dives into the global bond market's turmoil as the yield on 30-year Treasuries spikes past 5%, triggering concerns over economic stability. Experts discuss the impact of President Trump's tariffs and how China's retaliatory measures have led to a worldwide selloff. The conversation also covers the role of central banks in managing these challenges and the potential for stagflation. Additionally, strategies for navigating volatility in equity and fixed-income markets are explored, amid rising gold prices and shifting investment dynamics.

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ANECDOTE

Lagarde's Composure

Tom Keene recounts observing Christine Lagarde during a European banking crisis.
Lagarde remained calm, focused on newspapers amidst the chaos.

INSIGHT

Hedging Drives Selloff

The bond market selloff is primarily driven by hedging, not bond selling.
Investors are concerned but not yet pessimistic enough to liquidate bond holdings.

INSIGHT

Central Bank Intervention Unlikely

The current market conditions don't necessitate central bank intervention.
The ECB has more flexibility than the Fed due to lower inflationary pressures.

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Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyApril 9th, 2025
Featuring:
1) Viktor Hjort, Global Head of Credit Strategy at BNP Paribas, joins to discuss the global bond selloff and whether the Fed will have to step in. The yield on 30-year US Treasuries briefly surpassed 5%, fueling the biggest selloff since 2020, with investors worried about President Donald Trump's tariffs and their potential impact on the economy and inflation.
2) Constance Hunter, Chief Economist at EIU, joins for an extended discussion on tariffs, the US economy, and outlook for inflation and stagflation. Theories abound about the cause of the bond selloff, including foreign selling of US debt, hedge funds unwinding positions, and a re-evaluation of US government debt by global reserve managers, with some predicting the Federal Reserve may need to step in to stabilize the bond market.
3) Greg Peters, Co-CIO at PGIM Fixed Income, discusses the bond market rout this morning. China retaliated to US tariffs with new levies of its own, causing a global market selloff, with US equity futures falling over 2% and European stocks plunging 4%. The selloff has affected various markets, including currencies, cryptocurrencies, bonds, and commodities, with oil prices falling to around $55 a barrel and the dollar weakening.
4) Ernie Tedeschi, Director of Economics at Yale Budget Lab, talks about their latest report on tariffs now that they've been implemented. Trump's reciprocal tariffs are now in place, imposing levies on China and 60 other trading partners with trade surpluses with the US. The tariffs have raised concerns about a full-blown trade war, with Asian countries bearing the brunt, and have led to a selloff in Treasuries and a decline in Asian and European shares.
5) Amanda Agati, CIO: Asset Allocation at PNC, on her equity outlook given tariffs and cracks emerging in the credit market. The US stock index has plunged nearly 19% since its February peak and is flirting with bear market levels, with the benchmark closing below the 5,000 level for the first time in nearly a year.

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