Amid Trump’s latest tariff threats, long-term Treasury yields are bouncing
Donald Trump apparently thinks that Smoot Hawley and the Great Depression were good ideas. A real history buff, I guess. New tariff threats hit Trump’s Truth Social every other day it seems. But he’s the president we’ve got and he is causing mayhem. *
The most important and sensitive markets in the Keynesian system are the debt markets; the bond markets.
Needless to say, rising interest rates are bad for an economy that runs on debt and been hooked and leveraged on the stuff for decades. Let’s look at the 30 year Treasury yield, which is the cost of long-term debt for the USS Good Ship Lollipop. We view it on the big picture (monthly chart) as the 30 year yield “Continuum”.
The chart shows that a forever-trend in bond yields (a continuum in disinflationary bond market signaling) was smashed to bits in 2022. The implication is that what has been, no longer will be. At least where the ability and efficacy of policymakers to rig asset markets by manipulating bonds are concerned.
Daily Chart
Dialing in to the daily chart view of the 30yr yield, the options are that the intermediate uptrend is still in force as noted by the green numbers and their higher highs and lows. As yet, there is only the potential for the yield to break down. For that, red ‘3’ would need to be taken out. **
There will be very different investment/portfolio strategies involved, depending on which way bond yields go. The Tariff threats are a real spanner in the works, but in a vacuum Team Rising Yields (declining bonds) still has the ball. Team Declining Yields has simply been counter-trend to this point.
* In and of itself not a bad thing in my book, because I sure did not want an extension of the blight we’ve had since Greenspan first led us off a sound path a quarter century ago. But the question is, does Trump know WTF he is doing, or is he just breaking things to see what happens?
** Although, not shown on the daily chart is fact that the January high was a “lower high” to the 2023 high (per the monthly chart), which presents the possibility that the yield has already made a double top and Team Declining Yields could ultimately take the ball.
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