NAB Morning Call

Bonds back from the brink

May 22, 2025
Ken Crompton, an Economist at NAB, dives into the recent fluctuations in U.S. Treasury yields, discussing their startling rise and the effects of the Big Beautiful Tax Bill. He highlights how government spending uncertainties influence bond markets and the significance of weak auction results. The conversation extends to the economic landscapes of the U.S. and Europe, touching on jobless claims and PMIs, while also addressing Bitcoin's price surge and its potential as 'new gold'. Overall, a mix of cautious optimism and economic challenges defines the current climate.
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INSIGHT

Tax Bill Eases Bond Market Fears

  • The Big Beautiful Tax Bill passing the House eased market fears despite adding to the US deficit.
  • The sharp Treasury yield sell-off and weak 20-year bond auction caused an overshoot, now consolidating.
INSIGHT

Long-Term Yield Pressures Persist

  • The underlying risk of rising US deficits remains despite the bill's passage.
  • Global factors like Japan's bond market changes and reduced BOJ support exert upward pressure on yields.
INSIGHT

Trade War Impact Limited So Far

  • US PMIs showed expansion despite trade war fears, indicating limited economic impact so far.
  • The pause in tariffs may be easing sentiment, but risks remain for the near future.
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