Donald Trump has finally blinked – but it’s not the stock markets that have forced him to act | Money News

Get this one to the Bond vigilantes.

This is the term used periodically to describe investors who push back against what is considered irresponsible fiscal or monetary policy by selling government bonds, in the process that increases yields, or implied borrowing costs.

Most of the focus on markets in the wake of Donald Trump’s imposition of rates on the rest of the world has been about the disastrous response to the stock market this past week.

It was previously something assumed to be taken seriously Mr Trump.

During his first term in the White House, the president took the strength of US equities – especially the S&P 500 – as a barometer of success, or otherwise of his administration.

He has blocked the reaction of the acid stock market to his rates over the past week If similar to “medicine” It had to be taken to correct what he considered harmful imbalances in the world.

But as always, these are the mortgage markets that Mr. Trump forced to cut – and, make no mistake, shiny is what he did.

For starters, after imposing its rates – justified by some cockamamia math and a false comparison, complete with Greek characters – the mortgage prices rose as shares were sold.

It was not uncommon: Big sale in shares, such as those seen in 1987 and in 2008, tends to be accompanied by rallies in bonds.

This week, however, this week saw something else, with shares continuing with crater and US government bonds to the case.

At the beginning of the week, returns on ten years of US Treasury bonds, which are traditionally seen as the safest of Safe Haven Investments, at 4.00%.

Early yesterday, they rose to 4.51%, a huge jump according to the standards of most investors. This is important.

The return of ten years helps determine the interest rate on a whole claw financial products that are important to ordinary Americans, including mortgage loans, car loans and credit card loans.

By increasing the return on such a security, the mortgage investors do their stuff. It is not too much to say things that it was something like Liz Truss and Kwasi quarterlang when the latter unveiled his mini-budget in October 2022.

And as with the aftermath of that event, the violent response in bonds was caused by forced sale.

It now seems that part of the sale has concluded that investors have the conclusion that the rates of Mr. Trump would inject a large dose of inflation into the US economy – and inflation is the enemy of all investments in this regard.

Part of this seems to be due to the fact that the US Treasury had the worst demand in nearly 18 months for $ 58 billion worth of three -year bonds on Tuesday.

But in this particular case, it appears that the sale was mainly due to investors, mainly hedge funds, which relax the so -called ‘base trading’ – in simple terms a strategy used to take advantage of the difference between a connection against, for example, $ 100 and a futures contract priced against, for example, $ 105.

In ordinary circumstances, a hedge fund can buy the mortgage at $ 100 and sell the futures contract at $ 105 and make a profit if the two prices come together, in what is normally a relative risk -free trade.

In fact, in fact, the hedge funds will ‘utilize’ themselves – or borrow themselves – to maximize potential returns.

The sudden and violent fall in the US Treasury this week reflects the fact that hedge funds had to close the trades by selling treasury.

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The White House, who was confronted with a possible increase in the borrowing costs for millions of US homeowners, consumers and businesses, decided to end its rates.

It was immediately rewarded by a spectacular rally in stock markets-The Nasdaq enjoyed its second-best day ever, and its best since 2001, while the S&P 500 enjoyed its third best session since World War II-and through a rally in the US Treasury.

The influential Wall Street Investment Bank Goldman Sachs immediately hampered its prediction of the likelihood of a US recession from 65% to 45% this year.

Of course, Mr. Trump does not admit that he has cut, and claims last night that some investors got a little Yippy, a little scared.

And it is quite possible that markets are ahead more volatile days: the ghost of Mr. Trump’s rates are reinstated at 90 days from now and are still on their way and a full -fledged trade war Between the US and China is now raging.

But Mr. Trump has cut. The Bond of Vigilantes put him on the heel. This president, who, through his aggressive use of emergency manager, was apparently more powerful than any of his predecessors, will never look so powerful again.