Anna Wong, Chief US Economist at Bloomberg Economics and former Fed and Trump White House insider, unpacks the bond market's impact on Trump's agenda. She discusses how rising bond yields may challenge economic expectations and deficit spending. Wong also explores the complex policymaking dynamics within the Trump administration and its fraught relationship with the Federal Reserve. Additionally, the conversation touches on the global repercussions of U.S. borrowing costs, illustrating the interconnectedness of today's financial systems.
Rising bond yields indicate investor concerns about inflation and borrowing costs, challenging Trump's economic agenda and fiscal strategies.
The political environment within a narrowly-split Congress may complicate the implementation of Trump's proposed policies due to rising borrowing costs.
Deep dives
The Impact of Open Source AI on Startups
Open source AI democratizes access to powerful tools, enabling startups to innovate without the high costs associated with proprietary software. For instance, RightSee utilizes Meta's Llama AI model to create Job Search Genius, an AI tool that assists candidates in crafting resumes and practicing interview skills. This approach not only enhances the capabilities of small businesses but also fosters a competitive environment where new ideas can flourish. Such innovations demonstrate the potential of open source technologies to empower a wider range of entrepreneurs and job seekers.
The Bond Market's Reaction to Political Changes
Rising bond yields signify the bond market's reaction to anticipated economic policies under the incoming Trump administration. A significant increase in the yield on 10-year treasury bonds from September to early 2025 reflects investor concerns regarding inflation and the government's borrowing costs. This shift raises questions about how Trump's proposed policies, particularly tax cuts and tariffs, could affect economic stability and borrowing capabilities. The bond market's signals may compel the administration to reconsider its fiscal strategies to avoid potential economic strain.
Potential Challenges Ahead for Trump's Economic Agenda
The political environment influences the effectiveness of Trump's economic agenda, especially in light of rising borrowing costs. While Republican control offers opportunities for tax cuts and increased spending, concerns about debt and inflation may create friction within the party. Key figures, such as incoming Treasury Secretary Scott Bessent, may advocate for more cautious approaches to prevent detrimental effects on the economy. As policymakers balance ambitious proposals and market realities, the unpredictability of political dynamics could pose challenges for implementation.
Bond market investors have been extremely busy so far this year, pushing up the cost of government borrowing—especially in the US but also around the world.
On this, the inaugural episode of Trumponomics, we look at whether recent moves in the bond market are worrying the incoming Trump administration, what effect they will have on a narrowly-split Congress and whether concerns on Capitol Hill may put some of Donald Trump’s agenda at risk.
Host Stephanie Flanders, Bloomberg’s head of government and economics, is joined by Anna Wong, chief US economist at Bloomberg Economics (she’s worked at the Federal Reserve and in the first Trump administration), and Bloomberg managing editor for US economic policy Kate Davidson.