Latest news with #USTreasurys
USA Today
2 days ago
- Business
- USA Today
Half of the bond market is US Treasurys. Why it's 'not healthy.'
Half of the bond market is US Treasurys. Why it's 'not healthy.' Show Caption Hide Caption Trump summons Fed's Powell to tell him he's wrong on rates U.S. President Donald Trump called Federal Reserve Chair Jerome Powell to the White House on May 29 for their first face-to-face meeting since he took office in January and told the central bank chief he was making a "mistake" by not lowering interest rates. Over the past 12 months, about half of all debt in the U.S. bond market has been Treasurys – bonds and notes issued by the federal government. That's according to a June 8 research note from Torsten Sløk, the chief economist for money manager Apollo. 'This is not healthy,' Sløk wrote. 'Half of credit issued in the economy should not be going to the government.' As USA TODAY has previously reported, the growing U.S. budget deficit has caught the attention of investors in the bond market. The deficit is the consequence of revenue – taxes, mostly – not keeping up with spending. As it increases, the government issues more debt to plug the hole, and as supply rises, the government needs to pay more to attract demand from investors. President Donald Trump's proposed tax bill would exacerbate that dynamic, swelling the deficit by an estimated $2.4 trillion over the next decade, according to the nonpartisan Congressional Budget Office. More: Treasury bond yields are surging as the Trump tax bill progresses. Here's why it matters. Since all kinds of credit products, such as mortgages, are linked to the important U.S. Treasury market, those higher borrowing costs ripple through the economy. Sløk has written previously about the concerns over the power dynamic between the government and bond investors. Some analysts are concerned that investors may become what's sometimes called 'bond vigilantes' – demanding certain fiscal conditions as a condition of buying a government's debt. Overseas investors own nearly one-third of outstanding Treasury debt. Sløk's June 8 analysis is a reminder that the Treasury's mounting debt has many ripple effects. 'The consequence is that investors need to allocate more and more dollars to finance the government rather than financing growth in the economy through loans to firms and consumers,' Sløk wrote. Read next: The White House's tax bill will consider SALT (again). What could that mean for you?
Yahoo
03-06-2025
- Business
- Yahoo
Wall Street Braces for More Investors Dissing Dollar
While we can't say there's ever a bad time for a two-week summer sojourn to Palermo, there certainly have been better times than now. That's because the US dollar is on a downward slide to its lowest point in roughly three years. While not necessarily a bad thing (unless you're looking for cheap arancini and bottles of the house cabernet sauvignon), the dip comes just as a couple of other key US economic indicators have begun blinking red, too. And, according to most experts, it's just the beginning of a protracted dollar decline. READ ALSO: Soups Heat Up for Campbell's as Snacks Grow Stale and Luxury Brands Sweat Consumer Discounting After Price Hikes While cooling trade tensions have fueled something of a market rebound recently, the rising tide has excluded the US dollar — which fell about 0.6% against a basket of trading partners on Monday to land near the three-year low point it hit in the immediate aftermath of 'Liberation Day' tariff announcements in April. According to analysts at Morgan Stanley, the dollar could decline by another 9% by this time next year, reaching depths not seen since the early days of the pandemic, as investors continue to rotate out of US assets. Along those lines: US Treasurys are in an epic slump of their own while a new GOP spending bill — which the nonpartisan Congressional Budget Office says will add a net $2.3 trillion to federal budget deficits over the next decade — works its way through Washington. Longer-term bonds have been hit the hardest: On Monday, the yield on the 30-year Treasury rose to nearly 5%, up from around 4% at the start of the year — and briefly even traded above the yield of the 20-year US bond, a rarity since the US Treasury re-introduced the 20-year bond in 2020. That comes after JPMorgan CEO Jamie Dimon warned of a coming 'crack in the bond market' last Friday, though he said he is 'not going to panic.' Also last week: Todd Sohn, senior ETF and technical strategist at Strategas Securities, told CNBC that 'long duration just doesn't work right now' and noted that long-term Treasurys have posted a negative performance since September, the worst such streak since the financial crisis. Manufacturing Discontent: Of course, crimping the value of the dollar was (at least partially) one of the White House's trade war goals — with the idea being that a weaker dollar could spur a revival in US manufacturing. While that might still come true, the most recent data suggests trade-warring has had the opposite effect. The Institute for Supply Management said Monday that its closely watched Purchasing Managers' Index of manufacturing activity fell to 48.5 in May, extending its contraction for a third straight month. The report helped fuel the bond and dollar declines on Monday. Manufacturing inputs are likely to get more expensive, too, with futures tracking steel and aluminum prices spiking after the White House announced it would double tariffs on imports of the metals. Next up on the list of economic indicators? A May jobs report, due Friday, which could show whether labor is feeling the same drag as the manufacturing sector and could influence whether the Federal Reserve cuts interest rates at a meeting later this month. On second thought, Maybe now is a great time to escape reality and enjoy the soft sands of Sicilian beaches. This post first appeared on The Daily Upside. To receive delivering razor sharp analysis and perspective on all things finance, economics, and markets, subscribe to our free The Daily Upside newsletter. Sign in to access your portfolio
Yahoo
24-05-2025
- Business
- Yahoo
Bond-market panic is being overhyped by market 'tourists,' says Morgan Stanley strategist
Jim Caron said the investor concern implied by rising bond yields is overdone. Yields on US Treasurys spiked this past week in response to President Donald Trump's tax bill. The Morgan Stanley strategist said the fiscal deficit has long been a well-known issue. The recent surge in US bond yields is overblown, said a chief investment officer at Morgan Stanley. He's referring to yields on 10- and 30-year US Treasurys, which rose as high as 4.6% and 5.2%, respectively, this past week. The increases came after the decision by Moody's to downgrade its rating on US debt on May 16, and accelerated in the following week on concerns over the sweeping budget bill advancing through Congress. While commentators have said fears about the swelling budget deficit are behind the week's bond-market jitters, Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management, told Business Insider he thinks the issue is being blown out of proportion. He said markets were already aware that the national deficit is a problem, so Trump's "big beautiful bill" that passed in the House of Representatives on Thursday isn't really the issue. Caron said he refers to those who believe Treasurys could lose their safe-haven status as "tourists in the market." The GOP's sweeping budget bill aims to extend the 2017 tax cuts, slash Medicaid spending and supplemental nutrition assistance, and increase military spending. Estimates vary, but the bill could add as much as $4 trillion to the government's deficit over the next 10 years. Caron doesn't necessarily think a widening deficit will erode the perception of Treasurys as ultra-safe investments. "I wouldn't say that there's a straight line connection to some of the deficit and tax talk," he said. "And that's kind of what everybody's trying to conflate and put together." "I think it would be refreshing to absolutely take a deeper look at that and just say, 'look, the fiscal situation is not new news,'" Caron said. The IMF expects the US federal deficit to dip from 7.3% of GDP last year to 6.5% this year. "The market is creating excess hysteria around it," Caron said of the deficit debate. The Morgan Stanley strategist argued that rising bond yields are a global issue, and not just a US problem. Long-dated bonds in the UK, Germany, and Japan have soared this year on fears over those countries' fiscal outlooks. "I always find it to be a very novice explanation when people say, 'oh, I think the US is losing its status and the dollar is going to lose its reserve status,'" Caron said. "If that were actually even 1% true, the markets would be selling off in a massive, massive way." Read the original article on Business Insider Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Business Insider
24-05-2025
- Business
- Business Insider
Bond-market panic is being overhyped by market 'tourists,' says Morgan Stanley strategist
He's referring to yields on 10- and 30-year US Treasurys, which rose as high as 4.6% and 5.2%, respectively, this past week. The increases came after the decision by Moody's to downgrade its rating on US debt on May 16, and accelerated in the following week on concerns over the sweeping budget bill advancing through Congress. While commentators have said fears about the swelling budget deficit are behind the week's bond-market jitters, Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management, told Business Insider he thinks the issue is being blown out of proportion. He said markets were already aware that the national deficit is a problem, so Trump's " big beautiful bill" that passed in the House of Representatives on Thursday isn't really the issue. Caron said he refers to those who believe Treasurys could lose their safe-haven status as "tourists in the market." The GOP's sweeping budget bill aims to extend the 2017 tax cuts, slash Medicaid spending and supplemental nutrition assistance, and increase military spending. Estimates vary, but the bill could add as much as $4 trillion to the government's deficit over the next 10 years. Caron doesn't necessarily think a widening deficit will erode the perception of Treasurys as ultra-safe investments. "I wouldn't say that there's a straight line connection to some of the deficit and tax talk," he said. "And that's kind of what everybody's trying to conflate and put together." "I think it would be refreshing to absolutely take a deeper look at that and just say, 'look, the fiscal situation is not new news,'" Caron said. The IMF expects the US federal deficit to dip from 7.3% of GDP last year to 6.5% this year. "The market is creating excess hysteria around it," Caron said of the deficit debate. The Morgan Stanley strategist argued that rising bond yields are a global issue, and not just a US problem. Long-dated bonds in the UK, Germany, and Japan have soared this year on fears over those countries' fiscal outlooks. "I always find it to be a very novice explanation when people say, 'oh, I think the US is losing its status and the dollar is going to lose its reserve status,'" Caron said. "If that were actually even 1% true, the markets would be selling off in a massive, massive way."
Business Insider
24-05-2025
- Business
- Business Insider
Bond-market panic is being overhyped by market 'tourists,' says Morgan Stanley strategist
Jim Caron said the investor concern implied by rising bond yields is overdone. Yields on US Treasurys spiked this past week in response to President Donald Trump's tax bill. The Morgan Stanley strategist said the fiscal deficit has long been a well-known issue. The recent surge in US bond yields is overblown, said a chief investment officer at Morgan Stanley. He's referring to yields on 10- and 30-year US Treasurys, which rose as high as 4.6% and 5.2%, respectively, this past week. The increases came after the decision by Moody's to downgrade its rating on US debt on May 16, and accelerated in the following week on concerns over the sweeping budget bill advancing through Congress. While commentators have said fears about the swelling budget deficit are behind the week's bond-market jitters, Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management, told Business Insider he thinks the issue is being blown out of proportion. He said markets were already aware that the national deficit is a problem, so Trump's " big beautiful bill" that passed in the House of Representatives on Thursday isn't really the issue. Caron said he refers to those who believe Treasurys could lose their safe-haven status as "tourists in the market." The GOP's sweeping budget bill aims to extend the 2017 tax cuts, slash Medicaid spending and supplemental nutrition assistance, and increase military spending. Estimates vary, but the bill could add as much as $4 trillion to the government's deficit over the next 10 years. Caron doesn't necessarily think a widening deficit will erode the perception of Treasurys as ultra-safe investments. "I wouldn't say that there's a straight line connection to some of the deficit and tax talk," he said. "And that's kind of what everybody's trying to conflate and put together." "I think it would be refreshing to absolutely take a deeper look at that and just say, 'look, the fiscal situation is not new news,'" Caron said. The IMF expects the US federal deficit to dip from 7.3% of GDP last year to 6.5% this year. "The market is creating excess hysteria around it," Caron said of the deficit debate. The Morgan Stanley strategist argued that rising bond yields are a global issue, and not just a US problem. Long-dated bonds in the UK, Germany, and Japan have soared this year on fears over those countries' fiscal outlooks. "I always find it to be a very novice explanation when people say, 'oh, I think the US is losing its status and the dollar is going to lose its reserve status,'" Caron said. "If that were actually even 1% true, the markets would be selling off in a massive, massive way."
