1 00:00:00,100 --> 00:00:01,966 welcome to money is freedom 2 00:00:01,966 --> 00:00:02,866 a podcast 3 00:00:02,866 --> 00:00:06,100 exploring how finance and freedom connect in our lives 4 00:00:07,000 --> 00:00:08,833 created from thoughtful research 5 00:00:08,833 --> 00:00:10,366 and narrated by Notebook L 6 00:00:10,366 --> 00:00:13,266 m a I this series brings you clear 7 00:00:13,266 --> 00:00:16,000 meaningful insights into finance and beyond 8 00:00:16,066 --> 00:00:18,866 welcome to episode 39 9 00:00:19,500 --> 00:00:20,233 Today 10 00:00:20,233 --> 00:00:23,066 we're diving into something that doesn't happen often 11 00:00:23,233 --> 00:00:25,033 the bond market is acting up 12 00:00:25,033 --> 00:00:27,500 and it's rattling more than just Wall Street 13 00:00:27,833 --> 00:00:29,966 it even spooked Donald Trump 14 00:00:29,966 --> 00:00:32,533 forcing a pause on some of his tariff plans 15 00:00:33,433 --> 00:00:35,166 let's break it all down 16 00:00:35,766 --> 00:00:36,100 you know we 17 00:00:36,100 --> 00:00:38,400 we all try to keep tabs on our finances right 18 00:00:38,433 --> 00:00:41,033 checking investments planning ahead or just uh 19 00:00:41,033 --> 00:00:42,500 figuring out what's going on with the economy 20 00:00:42,500 --> 00:00:43,966 absolutely and lately 21 00:00:44,166 --> 00:00:46,800 there's been some really well 22 00:00:46,800 --> 00:00:48,100 let's say interesting activity 23 00:00:48,100 --> 00:00:50,400 maybe even a little weird in the bond market 24 00:00:50,400 --> 00:00:52,366 yeah the bond market doesn't always grab headlines 25 00:00:52,366 --> 00:00:55,166 but its impact is huge yeah 26 00:00:55,300 --> 00:00:56,566 massive exactly 27 00:00:56,566 --> 00:00:57,800 so for this deep dive 28 00:00:57,800 --> 00:00:59,600 we pulled together some uh 29 00:00:59,600 --> 00:01:00,500 pretty compelling stuff 30 00:01:00,500 --> 00:01:02,000 we've got this social media post 31 00:01:02,000 --> 00:01:04,100 you know pointing out how a past trend 32 00:01:04,666 --> 00:01:06,333 seems to have just flipped 33 00:01:06,600 --> 00:01:09,433 plus some text that goes deeper on that 34 00:01:09,433 --> 00:01:10,800 some audio commentary 35 00:01:10,800 --> 00:01:12,700 from someone who really tracks this stuff 36 00:01:12,700 --> 00:01:15,300 and then a bunch of news articles from today 37 00:01:15,300 --> 00:01:17,400 April 11th, 2025 38 00:01:17,566 --> 00:01:21,600 all zeroing in on this strange bond behavior right 39 00:01:21,866 --> 00:01:24,066 so our goal today is pretty straightforward right 40 00:01:24,066 --> 00:01:27,000 let's try to unpack why the bond market is acting so 41 00:01:27,000 --> 00:01:28,866 well unexpectedly 42 00:01:28,900 --> 00:01:31,333 and what it might be signaling for the bigger picture 43 00:01:31,500 --> 00:01:32,433 you know for all of us 44 00:01:32,433 --> 00:01:33,366 yeah absolutely 45 00:01:33,366 --> 00:01:35,000 and the core question really is 46 00:01:35,066 --> 00:01:37,166 what do these recent moves actually mean 47 00:01:37,166 --> 00:01:40,800 is it just a blip or something deeper 48 00:01:40,900 --> 00:01:42,300 especially when you look at history 49 00:01:42,300 --> 00:01:43,866 how bonds usually acted 50 00:01:43,900 --> 00:01:46,300 and compare it to current economic policies 51 00:01:46,300 --> 00:01:48,200 and that social media post you mentioned 52 00:01:48,200 --> 00:01:49,433 really hit on something key 53 00:01:49,433 --> 00:01:50,566 didn't it it did 54 00:01:50,566 --> 00:01:52,300 the whole flight to quality thing 55 00:01:52,300 --> 00:01:54,866 for like 20 years when stocks got rocky 56 00:01:54,866 --> 00:01:57,166 people piled into long term U 57 00:01:57,166 --> 00:01:59,233 s Treasuries safety 58 00:01:59,233 --> 00:02:00,233 yeah the safe harbor 59 00:02:00,233 --> 00:02:01,933 but that post points out 60 00:02:02,100 --> 00:02:03,900 that's just not happening this time 61 00:02:03,900 --> 00:02:05,200 it's absent okay 62 00:02:05,200 --> 00:02:06,666 let's dig into that shift then 63 00:02:06,666 --> 00:02:08,866 that post had a chart right 64 00:02:08,966 --> 00:02:13,266 showing the 30 year bond yield against uh 65 00:02:13,266 --> 00:02:14,666 stock market stress periods 66 00:02:14,666 --> 00:02:15,833 yeah and it was pretty clear 67 00:02:15,833 --> 00:02:18,800 you saw those green boxes Brexit covid 68 00:02:18,800 --> 00:02:21,266 I remember seeing those during those big scares 69 00:02:21,266 --> 00:02:22,600 you saw yields go down 70 00:02:22,600 --> 00:02:25,266 meaning money was flowing into those long bonds 71 00:02:25,266 --> 00:02:27,066 counter trend move like they called it 72 00:02:27,066 --> 00:02:29,200 but now now it's the opposite or well 73 00:02:29,200 --> 00:02:30,666 it's just not happening that way 74 00:02:30,666 --> 00:02:33,166 which ties right into that audio commentary 75 00:02:33,166 --> 00:02:35,466 we looked at what is the commentary at 76 00:02:35,500 --> 00:02:38,500 well the speaker specifically remembered past crises 77 00:02:38,500 --> 00:02:41,700 like Lehman Brothers or that initial Covid shock 78 00:02:41,700 --> 00:02:43,433 and back then he said 79 00:02:43,433 --> 00:02:44,900 the gains you made in bonds 80 00:02:44,900 --> 00:02:47,066 helped offset the losses in stocks 81 00:02:47,066 --> 00:02:48,633 like a cushion ah 82 00:02:48,633 --> 00:02:49,866 okay so it soften the blow 83 00:02:49,866 --> 00:02:51,433 exactly he even put numbers on it 84 00:02:51,433 --> 00:02:53,833 said something like $8 trillion 85 00:02:53,833 --> 00:02:54,666 lost in Lehman 86 00:02:54,666 --> 00:02:58,566 but maybe $3.5 trillion recouped in bonds right 87 00:02:58,566 --> 00:03:01,166 and $9 trillion lost in covid stocks 88 00:03:01,166 --> 00:03:03,566 but about $4 trillion recouped in bonds 89 00:03:03,566 --> 00:03:06,100 that's that's a significant buffer 90 00:03:06,100 --> 00:03:07,200 yeah no kidding 91 00:03:07,266 --> 00:03:12,333 so that classic 60 40 portfolio 60% stocks 40% bonds 92 00:03:12,666 --> 00:03:14,300 yeah it wouldn't get totally crushed 93 00:03:14,300 --> 00:03:16,466 cause the 40% did its job precisely 94 00:03:16,466 --> 00:03:18,800 but the audio commentary hammered this point 95 00:03:18,800 --> 00:03:20,166 right now people have lost what 96 00:03:20,166 --> 00:03:23,200 maybe $9 trillion in their 4 o 1 k's since the highs 97 00:03:23,200 --> 00:03:24,100 yeah a huge number 98 00:03:24,100 --> 00:03:26,200 but that offsetting gain from bonds 99 00:03:26,200 --> 00:03:28,766 it's just not fair this time not materializing 100 00:03:28,766 --> 00:03:30,766 so why not why are bonds falling too 101 00:03:30,766 --> 00:03:31,833 well the audio pointed out 102 00:03:31,833 --> 00:03:34,100 yields have been rising pretty steadily since December 103 00:03:34,100 --> 00:03:37,466 and remember yields up means prices down right 104 00:03:37,466 --> 00:03:39,633 inverse relationship always got to remember that 105 00:03:39,633 --> 00:03:40,866 so if you're holding bonds 106 00:03:40,866 --> 00:03:42,700 their value is shrinking at the same time 107 00:03:42,700 --> 00:03:44,066 your stocks are getting hit ouch 108 00:03:44,066 --> 00:03:46,400 that's the double whammy that's exactly it 109 00:03:46,400 --> 00:03:47,566 so the wealth destruction 110 00:03:47,566 --> 00:03:51,166 for someone with that kind of balanced portfolio is 111 00:03:51,166 --> 00:03:53,200 well much worse than in the past 112 00:03:53,200 --> 00:03:56,100 the safety net seems gone 113 00:03:56,100 --> 00:03:58,300 and the commentaries this isn't brand new right 114 00:03:58,300 --> 00:04:00,633 this started before just the last few weeks 115 00:04:00,633 --> 00:04:01,833 yeah that was a key point 116 00:04:01,833 --> 00:04:04,666 this decoupling this break between stocks and bonds 117 00:04:04,866 --> 00:04:07,200 it really started back in 2022 118 00:04:07,200 --> 00:04:09,066 and it seems to be continuing 119 00:04:09,066 --> 00:04:11,766 okay so that suggests something fundamental has shifted 120 00:04:11,766 --> 00:04:13,566 what's driving it what's the main theory 121 00:04:13,566 --> 00:04:15,366 well according to that audio commentary 122 00:04:15,366 --> 00:04:19,166 a huge factor is massive federal deficit spending 123 00:04:19,166 --> 00:04:20,433 ah the deficit again 124 00:04:20,433 --> 00:04:22,500 yeah the numbers are pretty staggering 125 00:04:22,500 --> 00:04:23,900 the speaker mentioned uh 126 00:04:23,900 --> 00:04:27,466 $11 trillion since 2020 Eleven trillion 127 00:04:27,466 --> 00:04:28,066 yeah 128 00:04:28,066 --> 00:04:31,633 and running it about $2.6 trillion a year right now 129 00:04:31,633 --> 00:04:34,866 which as one of the text pointed out is like 9% of GDP 130 00:04:34,866 --> 00:04:38,866 9% of the entire economy just in deficit spending 131 00:04:38,866 --> 00:04:39,700 that's enormous 132 00:04:39,700 --> 00:04:41,966 it really is an enormous amount of government borrowing 133 00:04:41,966 --> 00:04:43,766 okay so connect the dots for me 134 00:04:43,766 --> 00:04:45,866 how does all that borrowing mess up the bond market 135 00:04:45,866 --> 00:04:48,366 like this the argument is basically this 136 00:04:48,866 --> 00:04:51,133 the government keeps issuing more and more debt 137 00:04:51,266 --> 00:04:54,166 plus they have to refinance a lot of existing debt 138 00:04:54,166 --> 00:04:55,433 this year okay 139 00:04:55,433 --> 00:04:57,100 so if you're an investor 140 00:04:57,166 --> 00:05:00,733 why would you want to buy say a 30 year Treasury bond 141 00:05:01,033 --> 00:05:03,666 lock your money up for decades 142 00:05:03,666 --> 00:05:05,800 especially if it hasn't been a safe haven lately 143 00:05:05,800 --> 00:05:06,666 exactly and 144 00:05:06,666 --> 00:05:08,266 if the government is just going to keep flooding 145 00:05:08,266 --> 00:05:09,700 the market with more bonds 146 00:05:09,700 --> 00:05:10,500 mmm be correct 147 00:05:11,366 --> 00:05:13,033 that could push prices down even further 148 00:05:13,033 --> 00:05:14,666 or keep yields high right 149 00:05:14,666 --> 00:05:16,500 so the audio suggested 150 00:05:16,800 --> 00:05:18,266 investors are kind of waking up to this 151 00:05:18,266 --> 00:05:19,300 they're getting more hesitant 152 00:05:19,300 --> 00:05:21,333 about buying those long term bonds 153 00:05:21,400 --> 00:05:23,466 that makes a certain intuitive sense 154 00:05:23,466 --> 00:05:25,600 yeah if you're worried about inflation down the road 155 00:05:25,600 --> 00:05:27,533 or just the sheer volume of debt 156 00:05:27,600 --> 00:05:30,200 maybe a long term bond at current yields 157 00:05:30,200 --> 00:05:34,400 isn't that appealing and less demand means lower prices 158 00:05:34,400 --> 00:05:35,300 higher yields 159 00:05:36,233 --> 00:05:37,500 it sort of feeds on itself 160 00:05:37,500 --> 00:05:39,033 doesn't it it can yeah 161 00:05:39,033 --> 00:05:40,600 which worsens the whole situation 162 00:05:40,600 --> 00:05:42,733 okay so deficit spending is a big piece 163 00:05:42,833 --> 00:05:44,666 what about the international angle 164 00:05:44,766 --> 00:05:47,966 and this idea of bond vigilantes 165 00:05:48,066 --> 00:05:49,633 the news articles were talking about that 166 00:05:49,633 --> 00:05:51,466 yeah that really came through in the news 167 00:05:51,600 --> 00:05:52,833 CNN Business reported 168 00:05:52,833 --> 00:05:55,600 the sell off happening in both stocks and Treasuries 169 00:05:55,600 --> 00:05:57,600 at the same time which is unusual 170 00:05:57,600 --> 00:06:00,066 very unusual and the trigger seemed to be 171 00:06:00,066 --> 00:06:02,466 worries about President Trump's tariff plans 172 00:06:02,800 --> 00:06:05,300 and maybe a trade war with China heating up again 173 00:06:05,300 --> 00:06:06,600 right because normally 174 00:06:06,666 --> 00:06:09,300 uncertainty like that makes people run to Treasuries 175 00:06:09,300 --> 00:06:11,566 the flight to safety exactly 176 00:06:11,566 --> 00:06:13,500 so seeing both go down together 177 00:06:13,500 --> 00:06:15,166 that's unsettling the article said 178 00:06:15,166 --> 00:06:17,633 it's usually linked to really extreme uncertainty 179 00:06:17,633 --> 00:06:20,633 like the pandemic or the 2008 crisis 180 00:06:20,633 --> 00:06:23,366 so what are these bond vigilantes then 181 00:06:23,366 --> 00:06:25,433 it's a term for investors 182 00:06:25,433 --> 00:06:26,166 basically 183 00:06:26,166 --> 00:06:28,566 who protest government policies they don't like 184 00:06:28,566 --> 00:06:30,833 how do they protest by selling government bonds 185 00:06:30,833 --> 00:06:32,466 or just refusing to buy new ones 186 00:06:32,466 --> 00:06:34,400 ah and that does what 187 00:06:34,400 --> 00:06:36,233 drives prices down exactly 188 00:06:36,233 --> 00:06:37,966 less demand lower prices 189 00:06:37,966 --> 00:06:39,466 which means higher yields 190 00:06:39,466 --> 00:06:41,233 which makes it more expensive for the government 191 00:06:41,233 --> 00:06:42,633 to borrow money precisely 192 00:06:42,633 --> 00:06:45,600 it's the market essentially disciplining the government 193 00:06:45,733 --> 00:06:46,966 sending a message like that 194 00:06:46,966 --> 00:06:49,133 James Carvel quote CNN mentioned 195 00:06:49,600 --> 00:06:52,900 about wanting to be reincarnated as the bond market 196 00:06:52,900 --> 00:06:54,866 so you can intimidate everybody huh 197 00:06:54,866 --> 00:06:56,566 yeah that quote captures the power 198 00:06:56,566 --> 00:06:58,400 doesn't it the potential power anyway 199 00:06:58,400 --> 00:07:00,900 and the article suggested it actually worked this time 200 00:07:00,900 --> 00:07:02,366 that the market reaction 201 00:07:02,366 --> 00:07:04,666 made Trump reconsider the tariffs 202 00:07:04,766 --> 00:07:07,700 seems like it might have both CNN and CNBC reported 203 00:07:07,700 --> 00:07:10,666 the bond market's negative reaction was a big reason 204 00:07:10,666 --> 00:07:12,433 he decided to delay some tariffs 205 00:07:12,433 --> 00:07:16,066 wow so the market spoke and policy change 206 00:07:16,066 --> 00:07:18,100 that's pretty direct that's a clear example 207 00:07:18,100 --> 00:07:19,300 yeah what else did the banks 208 00:07:19,300 --> 00:07:22,900 like UBS and Deutsche Bank say in that CNN piece 209 00:07:23,000 --> 00:07:26,033 well UPS had a more maybe technical take 210 00:07:26,033 --> 00:07:28,300 investors selling bonds just to raise cash 211 00:07:28,300 --> 00:07:30,566 to cover stock losses okay 212 00:07:30,566 --> 00:07:33,166 plausible but Deutsche Bank raised a frankly 213 00:07:33,166 --> 00:07:35,500 more worrying question they wondered aloud 214 00:07:35,500 --> 00:07:36,600 if US government bonds 215 00:07:36,600 --> 00:07:37,966 are actually losing their status 216 00:07:37,966 --> 00:07:39,966 as the ultimate safe haven 217 00:07:39,966 --> 00:07:42,366 whoa that ties right back to our main theme 218 00:07:42,366 --> 00:07:43,600 doesn't it directly 219 00:07:43,600 --> 00:07:46,500 if a major bank is questioning that status 220 00:07:47,033 --> 00:07:48,800 that's significant definitely 221 00:07:49,100 --> 00:07:52,100 now how do international investors and tariffs 222 00:07:52,366 --> 00:07:53,833 fit into this bond selling 223 00:07:53,833 --> 00:07:55,033 well CNN suggested 224 00:07:55,033 --> 00:07:57,433 foreign investors might sell Treasuries as a sort of 225 00:07:57,433 --> 00:07:59,400 negotiating tactic against tariffs 226 00:07:59,400 --> 00:08:01,066 like you tariff us 227 00:08:01,066 --> 00:08:03,366 we sell your debt bit of financial hardball 228 00:08:03,366 --> 00:08:05,700 could be also just mechanically 229 00:08:06,000 --> 00:08:08,966 if the US imports less because of tariffs 230 00:08:09,166 --> 00:08:11,866 fewer US dollars end up overseas right 231 00:08:11,866 --> 00:08:12,700 which means 232 00:08:12,700 --> 00:08:15,166 foreign investors have fewer dollars to then 233 00:08:15,166 --> 00:08:17,233 turn around and buy US Treasury bonds 234 00:08:17,233 --> 00:08:19,700 with less capacity maybe less desire 235 00:08:19,700 --> 00:08:21,600 makes sense less trade 236 00:08:21,700 --> 00:08:24,300 fewer dollars flowing back into US debt 237 00:08:25,900 --> 00:08:28,900 and this links to that point in one text about China 238 00:08:28,900 --> 00:08:29,466 right right 239 00:08:29,466 --> 00:08:30,666 trading more with other countries 240 00:08:30,666 --> 00:08:32,100 exactly that text pointed out 241 00:08:32,100 --> 00:08:34,266 China is now the top trade partner for like 242 00:08:34,266 --> 00:08:35,600 140 countries so 243 00:08:35,600 --> 00:08:37,866 maybe they're less reliant on selling to the US 244 00:08:37,866 --> 00:08:41,100 and less reliant on buying US bonds with those dollars 245 00:08:41,166 --> 00:08:42,166 that was the argument 246 00:08:42,166 --> 00:08:44,800 the old pattern was sell stuff to the US 247 00:08:44,800 --> 00:08:48,366 buy US bonds the bond games shift might be towards 248 00:08:48,566 --> 00:08:49,566 sell stuff to the US 249 00:08:49,566 --> 00:08:51,666 use the dollars to buy stuff from wherever 250 00:08:51,666 --> 00:08:53,900 maybe even from the US but buying goods 251 00:08:53,900 --> 00:08:54,700 not just ballon 252 00:08:54,700 --> 00:08:57,100 reducing the need to just park the cash in treasuries 253 00:08:57,100 --> 00:08:58,266 yeah and there was another 254 00:08:58,266 --> 00:09:00,433 kind of pointed suggestion in one excerpt 255 00:09:00,433 --> 00:09:02,766 about the US potentially using tariffs 256 00:09:02,766 --> 00:09:04,833 if countries don't buy US goods 257 00:09:04,833 --> 00:09:06,666 yes that tit for tat idea 258 00:09:06,666 --> 00:09:08,266 if they don't buy enough U 259 00:09:08,266 --> 00:09:09,400 s stuff 260 00:09:09,600 --> 00:09:12,733 maybe tariffs equal to that value get imposed 261 00:09:12,966 --> 00:09:15,300 which would stir things up even more obviously 262 00:09:15,300 --> 00:09:16,633 yeah more trade disruption 263 00:09:16,633 --> 00:09:18,766 more bond market ripples potentially 264 00:09:18,766 --> 00:09:20,766 that excerpt also made that sort of 265 00:09:20,766 --> 00:09:23,233 cynical point about the US paying interest for years 266 00:09:23,233 --> 00:09:24,600 on bonds that bought 267 00:09:24,600 --> 00:09:25,900 goods that wear out quickly 268 00:09:25,900 --> 00:09:29,933 okay so it's this really complex mix deficits 269 00:09:30,033 --> 00:09:32,566 trade wars changing global dynamics 270 00:09:32,566 --> 00:09:35,866 investor psychology all hitting the bond market 271 00:09:35,866 --> 00:09:36,566 pretty much yeah 272 00:09:36,566 --> 00:09:38,666 so what were the immediate market signals 273 00:09:38,666 --> 00:09:39,900 what did the news say happened 274 00:09:39,900 --> 00:09:41,366 like yesterday and the day before 275 00:09:41,366 --> 00:09:41,966 okay so 276 00:09:41,966 --> 00:09:44,966 both CNN and CNBC flagged a big jump in the 10 year 277 00:09:44,966 --> 00:09:48,066 Treasury yield got as high as 4.5% Wednesday 278 00:09:48,066 --> 00:09:50,500 settled back just above 4.4% Thursday 279 00:09:50,500 --> 00:09:53,766 and 4.5% is pretty high compared to recent history 280 00:09:53,766 --> 00:09:54,700 right and definitely noticeable 281 00:09:54,700 --> 00:09:56,900 and again high yield means lower bond price 282 00:09:56,900 --> 00:09:57,233 oh yeah 283 00:09:57,233 --> 00:09:59,866 but crucially that 10 year yield is a benchmark right 284 00:09:59,866 --> 00:10:01,233 it affects everything mortgages 285 00:10:01,233 --> 00:10:02,600 mortgages car loans 286 00:10:02,600 --> 00:10:04,800 business borrowing higher yields there 287 00:10:04,800 --> 00:10:07,166 mean higher costs for lots of people and companies 288 00:10:07,166 --> 00:10:08,633 okay so rising borrowing costs 289 00:10:08,633 --> 00:10:10,566 what else did the dollar react 290 00:10:10,566 --> 00:10:13,800 it did CNN mentioned the US Dollar index fell sharply 291 00:10:13,800 --> 00:10:15,466 like 1.8% on Thursday 292 00:10:15,466 --> 00:10:17,300 and a falling dollar usually means 293 00:10:17,300 --> 00:10:20,300 often seen as lower confidence in the US economy 294 00:10:20,300 --> 00:10:23,066 or its assets relative to others 295 00:10:23,066 --> 00:10:24,700 okay so rising yields 296 00:10:24,866 --> 00:10:26,000 falling dollar 297 00:10:26,600 --> 00:10:28,366 not exactly confidence boosting signal 298 00:10:28,366 --> 00:10:29,766 how about stocks vital 299 00:10:29,766 --> 00:10:30,933 very volatile yeah 300 00:10:31,033 --> 00:10:33,666 CNBC said stocks rallied hard Wednesday 301 00:10:33,666 --> 00:10:35,200 when the tariff delay was announced 302 00:10:35,200 --> 00:10:38,466 a relief rally but then plunged again Thursday 303 00:10:38,466 --> 00:10:40,966 so the underlying nervousness didn't just vanish 304 00:10:40,966 --> 00:10:42,300 and Bill Ackman chimed in 305 00:10:42,300 --> 00:10:45,233 yeah his comment was basically falling stocks 306 00:10:45,233 --> 00:10:47,100 rising bond yields falling dollar 307 00:10:47,100 --> 00:10:49,400 that's not a recipe for success 308 00:10:49,400 --> 00:10:51,200 not what you want to see policy achieve 309 00:10:51,200 --> 00:10:53,200 no that sounds like a pretty bad trifecta 310 00:10:53,433 --> 00:10:55,200 did other analysts have takes 311 00:10:55,800 --> 00:10:57,333 picked at asset management 312 00:10:57,466 --> 00:10:59,100 their view according to CNN 313 00:10:59,100 --> 00:10:59,400 was that 314 00:10:59,400 --> 00:11:01,800 the administration's policies are actually damaging 315 00:11:01,800 --> 00:11:04,500 that idea of US assets being a safe haven 316 00:11:04,500 --> 00:11:06,800 echoing the Deutsche Bank concern again 317 00:11:06,800 --> 00:11:08,800 so multiple sources pointing to that 318 00:11:08,800 --> 00:11:11,000 potential erosion of safe haven status 319 00:11:11,166 --> 00:11:14,433 what about ing ING's analysts basically said 320 00:11:14,433 --> 00:11:17,066 markets won't forget these wild swings quickly 321 00:11:17,066 --> 00:11:19,866 it makes investors jumpy more cautious 322 00:11:19,866 --> 00:11:21,066 could have lingering effect 323 00:11:21,066 --> 00:11:22,466 in CNBC's headline 324 00:11:22,900 --> 00:11:26,700 Trump dodged a disaster because the bond market reacted 325 00:11:26,700 --> 00:11:28,900 that sounds dramatic it does 326 00:11:28,900 --> 00:11:29,600 their point was 327 00:11:29,600 --> 00:11:31,500 the bond market's reaction was so strong 328 00:11:31,500 --> 00:11:33,100 they called it a scream 329 00:11:33,233 --> 00:11:35,966 that it forced the policy change on tariffs 330 00:11:36,066 --> 00:11:37,900 potentially avoiding something worse 331 00:11:37,900 --> 00:11:40,800 okay did they get into why the bond market reacted 332 00:11:40,800 --> 00:11:43,633 so violently beyond just the policy concerns 333 00:11:43,633 --> 00:11:45,433 yeah they mentioned some more technical stuff 334 00:11:45,433 --> 00:11:48,800 the unwinding of basis swaps trades 335 00:11:48,800 --> 00:11:49,833 basis swaps yeah 336 00:11:49,833 --> 00:11:50,500 okay what are those 337 00:11:50,500 --> 00:11:52,700 in simple terms think of them almost like insurance 338 00:11:52,700 --> 00:11:53,200 contracts 339 00:11:53,200 --> 00:11:55,300 between different parts of the interest rate market 340 00:11:55,300 --> 00:11:58,100 okay when one part moves really fast and unexpectedly 341 00:11:58,100 --> 00:12:00,000 like Treasury yield spiking 342 00:12:00,000 --> 00:12:01,866 uh huh these insurance contracts 343 00:12:01,866 --> 00:12:03,466 can suddenly become very expensive 344 00:12:03,466 --> 00:12:05,400 for whoever bought the insurance 345 00:12:05,433 --> 00:12:06,866 often hedge funds right 346 00:12:06,866 --> 00:12:08,400 so to cover those sudden costs 347 00:12:08,400 --> 00:12:10,300 they might be forced to sell other things they own 348 00:12:10,300 --> 00:12:12,233 quickly like government bonds 349 00:12:12,233 --> 00:12:14,233 ah so forced selling 350 00:12:14,233 --> 00:12:17,000 even if they don't want to sell just to raise cash 351 00:12:17,000 --> 00:12:19,766 exactly which adds more selling pressure 352 00:12:19,766 --> 00:12:22,166 pushes prices down yields up 353 00:12:22,166 --> 00:12:24,033 it amplifies the move I see 354 00:12:24,033 --> 00:12:25,466 so it's not just about the big picture 355 00:12:25,466 --> 00:12:27,600 but these internal market mechanics 356 00:12:27,600 --> 00:12:30,533 can make things worse did Janet Yellen comment on this 357 00:12:30,533 --> 00:12:32,233 yeah the former Treasury secretary 358 00:12:32,233 --> 00:12:33,600 CNBC quoted her 359 00:12:33,600 --> 00:12:36,000 pointing to highly leveraged hedge funds 360 00:12:36,000 --> 00:12:38,000 having to sell adding to the instability 361 00:12:38,000 --> 00:12:40,800 so reinforcing that idea about the basis swaps 362 00:12:40,800 --> 00:12:41,866 and forced selling 363 00:12:41,866 --> 00:12:44,500 and the deficit came up again in the CNBC piece too 364 00:12:44,500 --> 00:12:45,800 right just keeps popping up 365 00:12:45,800 --> 00:12:47,300 absolutely they highlighted 366 00:12:47,300 --> 00:12:50,600 it's on track to top $2 trillion a year 367 00:12:50,600 --> 00:12:52,366 which just adds to that background 368 00:12:52,366 --> 00:12:55,633 level of investor angst about US fiscal health 369 00:12:55,633 --> 00:12:57,200 it's kind of a catch 22 isn't it 370 00:12:57,200 --> 00:13:00,100 yeah CBC also mentioned that lowering the trade deficit 371 00:13:00,100 --> 00:13:01,833 which is usually seen as a good goal 372 00:13:01,833 --> 00:13:04,766 yeah could actually reduce demand for Treasuries 373 00:13:04,800 --> 00:13:07,300 how does that work it's that dollar flow thing again 374 00:13:07,300 --> 00:13:09,866 lower trade deficit means the US is importing less 375 00:13:09,866 --> 00:13:12,066 sending fewer dollars overseas right 376 00:13:12,066 --> 00:13:13,300 fewer dollars overseas means 377 00:13:13,300 --> 00:13:16,066 foreign buyers have fewer dollars to buy US Treasuries 378 00:13:16,233 --> 00:13:18,000 so paradoxically 379 00:13:18,433 --> 00:13:20,200 improving the trade balance 380 00:13:20,200 --> 00:13:22,800 might actually hurt demand for US debt 381 00:13:22,800 --> 00:13:23,700 hmm hmm 382 00:13:23,700 --> 00:13:24,966 that's counterintuitive 383 00:13:25,500 --> 00:13:26,200 and finally 384 00:13:26,200 --> 00:13:28,866 they mentioned big holders like Japan and China 385 00:13:29,066 --> 00:13:30,600 trimming their Treasury holdings 386 00:13:30,600 --> 00:13:32,500 yeah scaling back a bit 387 00:13:32,500 --> 00:13:35,366 it's not necessarily a massive move in the grand scheme 388 00:13:35,366 --> 00:13:36,666 but when the two biggest 389 00:13:36,666 --> 00:13:39,166 foreign holders are reducing exposure 390 00:13:39,400 --> 00:13:41,566 even gradually it doesn't help confidence 391 00:13:41,566 --> 00:13:43,666 especially when the US needs to borrow so much 392 00:13:43,666 --> 00:13:47,100 exactly it's just another factor adding to the unease 393 00:13:47,500 --> 00:13:48,566 CNBC finished 394 00:13:48,566 --> 00:13:51,266 by stressing just how huge the bond market is 395 00:13:51,266 --> 00:13:54,466 compared to stocks underlining why these signals 396 00:13:54,466 --> 00:13:57,200 these unusual moves really matter 397 00:13:57,200 --> 00:13:59,666 okay so let's try to pull this all together 398 00:13:59,666 --> 00:14:00,433 it really sounds like 399 00:14:00,433 --> 00:14:02,766 the bond market is sending some very different signals 400 00:14:02,766 --> 00:14:05,166 than usual potentially quite significant ones 401 00:14:05,166 --> 00:14:06,600 yeah I think that's fair to say 402 00:14:06,600 --> 00:14:07,866 it's not playing that traditional 403 00:14:07,866 --> 00:14:10,166 safe haven role during stock market stress 404 00:14:10,166 --> 00:14:11,666 you're like it used to know 405 00:14:11,666 --> 00:14:14,566 and it seems to be this mix of factors colliding right 406 00:14:14,566 --> 00:14:16,666 the massive federal spending and the deficit 407 00:14:16,666 --> 00:14:18,800 that's clearly a huge underlying issue 408 00:14:19,000 --> 00:14:21,200 investors are getting nervous about all that debt 409 00:14:21,200 --> 00:14:22,733 definitely a major piece 410 00:14:22,800 --> 00:14:25,233 but then you layer on the global trade stuff 411 00:14:25,233 --> 00:14:27,366 the tear of tensions the uncertainty 412 00:14:27,366 --> 00:14:29,266 which spooks international investors 413 00:14:29,266 --> 00:14:32,666 and brings these bond vigilantes into the picture 414 00:14:32,700 --> 00:14:34,233 may be pushing back on policy 415 00:14:34,233 --> 00:14:36,833 exactly all these things seem to be interacting 416 00:14:36,833 --> 00:14:38,100 and we need to remember 417 00:14:38,100 --> 00:14:39,900 this isn't just charts and numbers 418 00:14:40,133 --> 00:14:44,800 rising bond yields mean real costs go up mortgages 419 00:14:44,800 --> 00:14:45,900 loans absolutely 420 00:14:45,900 --> 00:14:46,966 real world impact 421 00:14:46,966 --> 00:14:49,300 and the volatility hits people's retirement accounts 422 00:14:49,300 --> 00:14:50,200 their investments 423 00:14:50,300 --> 00:14:52,500 it affects financial security for sure 424 00:14:52,500 --> 00:14:53,766 it's not just a Wall Street story 425 00:14:53,766 --> 00:14:56,100 it matters for everyone trying to manage their money 426 00:14:56,100 --> 00:14:56,766 so yeah 427 00:14:56,766 --> 00:14:58,800 keeping an eye on the bond market seems uh 428 00:14:59,033 --> 00:15:00,600 pretty crucial right now okay 429 00:15:00,600 --> 00:15:02,600 so on that note uh 430 00:15:02,800 --> 00:15:04,933 here's maybe a final thought to chew on 431 00:15:05,000 --> 00:15:07,933 could this weird behavior we're seeing hmm 432 00:15:08,300 --> 00:15:10,766 could it signal something really fundamental changing 433 00:15:10,766 --> 00:15:12,900 like is the role of US Treasuries 434 00:15:12,900 --> 00:15:14,433 as the ultimate safe asset 435 00:15:14,433 --> 00:15:16,166 actually being reshaped right now 436 00:15:16,166 --> 00:15:17,666 hmm that's the big question 437 00:15:17,666 --> 00:15:19,533 isn't it and if it is changing 438 00:15:19,800 --> 00:15:21,766 what are the long term consequences 439 00:15:21,866 --> 00:15:23,166 not just for our portfolios 440 00:15:23,166 --> 00:15:24,700 but for the whole global economy 441 00:15:24,700 --> 00:15:25,666 yeah that's a 442 00:15:25,666 --> 00:15:26,633 that's a profound thought 443 00:15:26,633 --> 00:15:29,266 if that bedrock Assumption starts to shift 444 00:15:29,266 --> 00:15:31,900 definitely something complex still unfolding 445 00:15:31,900 --> 00:15:34,600 we definitely encourage everyone listening to maybe 446 00:15:34,600 --> 00:15:35,900 look back at some of these sources 447 00:15:35,900 --> 00:15:37,833 keep exploring the themes and 448 00:15:37,833 --> 00:15:39,466 you know form their own perspectives