Latest news with #TreasuryDepartment
Forbes
7 hours ago
- Business
- Forbes
Bond Investors Sound The Alarm
CHICAGO, IL - MARCH 15: Traders watch prices in the Ten-Year Treasury Note options pit at the CME ... More Group following the announcement by the Federal Open Market Committee (FOMC) that they would maintain the key policy rate near zero on March 15, 2011 in Chicago, Illinois. U.S. stock and commodity prices tumbled today following a sharp drop in Japans stock market, as investors worldwide worry about the economic impact of that country's recent earthquake, tsunami and unfolding nuclear crisis. (Photo by) The financial markets in 2025 have been a whirlwind of volatility, with the stock market battered by economic policy shocks and the bond market grappling with its own turbulence. The 10-year Treasury yield, a critical barometer of economic health, has oscillated between approximately 4.0% and 4.47% this year, injecting unprecedented volatility into a market typically known for its stability. For bond investors, the chaos stems from a volatile mix of aggressive policy moves, resurgent inflation fears, and a looming fiscal crisis—culminating in the House passage of the controversial One Big Beautiful Bill Act. As the Senate debates this transformative legislation, bond investors are bracing for higher yields and the economic fallout that could follow. Treasury Secretary's Ambitious But Elusive Goal From the moment Scott Bessent, sworn in as Treasury Secretary on January 28, 2025, took office, he declared lowering interest rates—particularly the 10-year Treasury yield—his top priority. With roughly half of the U.S.'s $1.9 trillion annual deficit tied to interest payments of $952 billion, according to the Congressional Budget Office, reducing yields is critical to slowing the growth of the national debt. Early in 2025, bond markets gave Bessent the benefit of the doubt and yields briefly dipped as investors anticipated progress. However, optimism has since given way to skepticism, as a series of policy missteps and economic headwinds have made Bessent's goal seem increasingly unattainable. Bond investors, known for their forward-looking analysis, are now pricing in a future of higher yields, driven by inflationary pressures and ballooning deficits. The disconnect between Bessent's stated objectives and the administration's policy actions has left the bond market on edge, with significant implications for the broader economy. Tariffs Spark Inflation Fears The bond market's unease began in earnest on April 2, 2025—dubbed 'Liberation Day' by President Trump—when the administration unveiled sweeping tariffs on nearly all imported goods. The announcement blindsided markets, triggering a sharp repricing of risk. The stock market embarked on a weeks-long slide, while the 10-year Treasury yield surged from around 4.0% to nearly 4.5% in just three days—an extraordinary move for the typically sedate Treasury market. For bond investors, the tariffs signaled a clear and present danger: resurgent inflation. Higher costs for imported goods could ripple through the economy, driving up consumer prices and forcing the Federal Reserve to maintain elevated interest rates. This directly undermines Bessent's goal of lowering yields, as bond investors demand higher returns to offset the risk of rising inflation. The tariffs have also strained global trade relationships, further clouding the economic outlook and adding to market uncertainty. A Credit Downgrade Deepens Concerns On May 16, 2025, Moody's delivered another blow, downgrading the U.S. credit rating from AAA to Aa1, the last major credit rating agency to take this step. Citing ballooning deficits, a growing national debt, and rising borrowing costs, the downgrade confirmed what many bond investors had already feared. While the move was not entirely unexpected, markets are still processing its implications, particularly as they await clarity on Republican budget legislation. The downgrade underscores the precarious state of U.S. fiscal health. With deficits projected to widen, bond investors are increasingly wary of holding U.S. debt without higher yields to compensate for the added risk. This dynamic further complicates Bessent's mission to lower interest rates, as rising borrowing costs threaten to spiral out of control. The One Big Beautiful Bill Act: A Fiscal Reckoning The passage of the One Big Beautiful Bill Act by the House of Representatives on May 22, 2025, by a 215-214 vote, has only intensified these concerns. Far from the fiscal restraint one might expect from a Republican-led initiative, the bill is projected to add $5.1 trillion to the national debt over the next decade if extended, according to the Committee for a Responsible Federal Budget. Now under consideration in the Senate, where significant changes are expected, the legislation signals a trajectory of growing deficits—a red flag for bond investors. The bill's fiscal hubris directly undermines Bessent's goal of reducing borrowing costs. Higher deficits mean increased Treasury issuance, which could flood the bond market and drive yields higher as investors demand greater compensation. With inflation concerns already heightened by tariffs, the Federal Reserve has little room to cut rates, leaving bond yields—and borrowing costs—poised to rise further. This creates a vicious cycle: higher yields increase the cost of servicing the national debt, further widening deficits and necessitating even more borrowing. The Broader Economic Fallout The implications of rising Treasury yields extend far beyond the bond market. Higher yields increase borrowing costs for businesses and consumers, slowing economic growth and putting pressure on everything from corporate expansions to mortgage rates. While the stock market's volatility grabs headlines, the bond market's dynamics have a more direct and profound impact on economic activity. As yields rise, borrowers—both corporate and individual—find themselves in a precarious position, with ripple effects that could dampen investment and consumer spending. For investors, the message is clear: the bond market is sounding a warning. The combination of tariff-driven inflation, a credit downgrade, and the One Big Beautiful Bill Act's fiscal blind spots creates a perfect storm for higher yields. This could weigh heavily on stock portfolios, as slower growth and tighter financial conditions erode corporate profits and investor confidence. As the Senate debates the One Big Beautiful Bill Act, bond investors are watching closely. Any indication that the final legislation will further inflate deficits could push yields higher still, threatening economic stability and undermining Bessent's goal of lower interest rates. For now, the bond market is sending a clear signal: bold policy promises are no match for fiscal realities. Investors would be wise to monitor Treasury yields closely and consider the risks posed to their portfolios in the year ahead. In a market defined by uncertainty, the bond market's message is unmistakable: brace for impact.
New York Post
19 hours ago
- Business
- New York Post
Sen. Elizabeth Warren sides with Trump's call to eliminate debt limit: ‘Should be scrapped'
Sen. Elizabeth Warren, D-Mass., said on Friday she agrees with President Donald Trump's call to eliminate the debt limit, urging bipartisan action to scrap it permanently. In a post on X, Warren wrote: '@realDonaldTrump and I agree: the debt limit should be scrapped to prevent an economic catastrophe.' 'Let's pass a bipartisan bill and get rid of it forever,' she added. The senator also said 'jacking up the debt limit by $4 trillion to fund more tax breaks for billionaires is an outrage,' in an attack on a GOP-backed tax bill to enact Trump's priorities. Warren's post cited comments Trump made at a news conference earlier on Friday, when he referenced her past support for eliminating the debt limit and said he 'always agreed with her' on the issue, 'She wanted to see it terminated, gotten rid of not being voted on every five years or 10 years, and the reason was because it's so catastrophic for our country,' Trump said. Sen. Elizabeth Warren said 'the debt limit should be scrapped to prevent an economic catastrophe.' Getty Images for Families Over Billionaires The debt limit was last suspended by Congress in the summer of 2023 as part of a bipartisan bill reached between Republican leadership and former President Joe Biden, pushing off the threat of national default through January of this year, when the debt limit was reinstated at more than $36 trillion. The Treasury Department said in January that the government would need to implement 'extraordinary measures' to prevent it from defaulting on its debt. Earlier this month, Treasury Secretary Scott Bessent called on Congress to raise the debt ceiling by mid-July to prevent the government from defaulting, warning that the country is on track to run out of money to pay its bills as early as August without congressional action. President Donald Trump speaks during a rally at the US Steel Mon Valley Works-Irvin plant on May 30, 2025. AP 'A failure to suspend or increase the debt limit would wreak havoc on our financial system and diminish America's security and global leadership position,' Bessent wrote to House Speaker Mike Johnson, R-La. 'Prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses and the federal government.' Republicans want to raise the debt ceiling as part of a broader package, but intra-party debate remains over issues such as tax changes.
The Sun
a day ago
- Business
- The Sun
Japan says there is no easy concession on US tariffs, seeks more talks in June
JAPAN and the U.S. on Friday agreed to hold another round of trade talks ahead of the G7 summit next month, Japan's top tariff negotiator said, stressing that no deal would be without concessions on all Washington's tariffs, including on autos. Japan's Economy Minister Ryosei Akazawa met with U.S. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in Washington for 130 minutes in a fourth round of the trade negotiations. 'We agreed to accelerate the talks and hold another round ahead of the G7 summit in June, where the leaders from Japan and the United States are set to meet,' Akazawa told Japanese media gathered at the Japanese embassy in Washington. The U.S. side, led by Bessent and Lutnick, called Friday's talks 'frank and constructive.' 'Secretary Bessent highlighted to Minister Akazawa the importance of addressing tariffs and non-tariff measures, increasing investment, and working together to address economic security and other issues of mutual concern,' a Treasury Department statement said. Japan faces a 24% tariff rate starting in July unless it can negotiate a deal with the U.S. It is also scrambling to find ways to get Washington to exempt its automakers from 25% tariffs on automobiles, Japan's biggest industry. Akazawa said Japan's position has not changed that the tariffs are not acceptable and he is 'strongly urging' the U.S. to immediately reconsider and drop all the tariffs, including those levied on automobiles, auto parts, aluminum and steel. 'If our requests to do that are met, we may be able to come to an agreement,' Akazawa told Japanese media gathered at the Japanese embassy in Washington. 'But if that is not possible, then it will be difficult for us to agree to a deal.' Japanese government sources said before the latest meeting that an immediate deal was unlikely, as they would never hastily seal a deal that would not benefit Japan, particularly the automobile sector. Akazawa declined to give details of the latest discussions, but said trade expansion, non-tariff barriers and cooperation in economic security have been on the agenda at every meeting. Semiconductor supply chains and rare earths are among economic security topics, he added. He also said, while he was closely monitoring Nippon Steel's possible deal for U.S. Steel, he could not yet comment on it due to a lack of any official announcement from the U.S. government.
The Sun
a day ago
- Business
- The Sun
Japan, US to hold new trade talks before G7 Summit
JAPAN and the U.S. on Friday agreed to hold another round of trade talks ahead of the G7 summit next month, Japan's top tariff negotiator said, stressing that no deal would be without concessions on all Washington's tariffs, including on autos. Japan's Economy Minister Ryosei Akazawa met with U.S. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in Washington for 130 minutes in a fourth round of the trade negotiations. 'We agreed to accelerate the talks and hold another round ahead of the G7 summit in June, where the leaders from Japan and the United States are set to meet,' Akazawa told Japanese media gathered at the Japanese embassy in Washington. The U.S. side, led by Bessent and Lutnick, called Friday's talks 'frank and constructive.' 'Secretary Bessent highlighted to Minister Akazawa the importance of addressing tariffs and non-tariff measures, increasing investment, and working together to address economic security and other issues of mutual concern,' a Treasury Department statement said. Japan faces a 24% tariff rate starting in July unless it can negotiate a deal with the U.S. It is also scrambling to find ways to get Washington to exempt its automakers from 25% tariffs on automobiles, Japan's biggest industry. Akazawa said Japan's position has not changed that the tariffs are not acceptable and he is 'strongly urging' the U.S. to immediately reconsider and drop all the tariffs, including those levied on automobiles, auto parts, aluminum and steel. 'If our requests to do that are met, we may be able to come to an agreement,' Akazawa told Japanese media gathered at the Japanese embassy in Washington. 'But if that is not possible, then it will be difficult for us to agree to a deal.' Japanese government sources said before the latest meeting that an immediate deal was unlikely, as they would never hastily seal a deal that would not benefit Japan, particularly the automobile sector. Akazawa declined to give details of the latest discussions, but said trade expansion, non-tariff barriers and cooperation in economic security have been on the agenda at every meeting. Semiconductor supply chains and rare earths are among economic security topics, he added. He also said, while he was closely monitoring Nippon Steel's possible deal for U.S. Steel, he could not yet comment on it due to a lack of any official announcement from the U.S. government.
Yahoo
a day ago
- Business
- Yahoo
Warren backs Trump call to scrap debt limit, blasts GOP tax bill
Sen. Elizabeth Warren (D-Mass.) on Friday backed President Trump's call to abolish the nation's debt ceiling, pressing for bipartisan action to 'get rid of it forever.' In a post on X, Warren wrote that she and Trump agree that the debt limit, which caps how much money the Treasury can owe to pay the country's bills, should 'be scrapped to prevent an economic catastrophe.' However, she also added in a jab to a GOP-crafted tax bill to enact Trump's priorities that 'jacking up the debt limit by $4 trillion to fund more tax breaks for billionaires is an outrage.' Her post referenced recent comments Trump made shortly before at a press conference with tech billionaire Elon Musk earlier on Friday afternoon. At the press conference, Trump cited Warren's past support for abolishing the debt limit and said he 'always agreed with her' on the matter. 'She wanted to see it terminated, gotten rid of not being voted on every five years or 10 years, and the reason was because it's so catastrophic for our country,' Trump said. The debt limit was last suspended by Congress as part of a bipartisan bill struck between former President Biden and GOP leadership in 2023, staving off the threat of national default through early 2025. The Treasury Department said back in January that the government would have to implement 'extraordinary measures' to keep the nation from defaulting on its more than $30 trillion debt – a scenario experts have warned would have disastrous economic effects for the U.S. Treasury Secretary Scott Bessent is urging Congress to raise the nation's debt ceiling by mid-July to prevent a default, warning such extraordinary measures could be exhausted in August when Congress is set to be in recess. Republicans are looking to raise the debt ceiling as part of the party's broader tax and spending cuts package, but there are concerns over the plan's path ahead amid intra-party rifts on tax changes, as well as reforms for programs like Medicaid and Supplemental Nutrition Assistance Program (SNAP). Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
