Bond market jitters continue despite Treasury moves; Trump declares "economic D-Day" on Iran - National & International News -

Bond market jitters continue despite Treasury moves

This week, government bond yields for the US and several other leading economies have hit their highest point since 2007. This has severe implications for the economy, for businesses, borrowers, investors and consumers. On Wednesday, US Treasury Secretary Scott Bessant announced that the US would double its bond buy-backs, which temporarily eased the pressure. On Thursday, that temporary reprieve dissipated.

The persistent unrest in the bond market is driven by several larger economic and geopolitical factors which are yet to be resolved. One of the biggest of those factors is the now 6-month-old war with Iran and the prolonged closure of the Strait of Hormuz. This has created uncertainty in the oil market and driven the price of crude to over $90 a barrel.

One of the largest underlying vulnerabilities now coming into play is the US national debt, which has now reached $40 trillion. A significant portion of that debt is held by the central banks of foreign countries, who are themselves facing severe economic headwinds due to the war in Iran. Because that debt is now seen as increasingly risky, buyers of these bonds (be they government or private entities) can now demand a premium for holding it, which drives up US borrowing costs.

Trump’s declares economic war on Iran, creating more market upheaval

On Thursday, Trump declared an “economic D-Day” on Iran, frustrated at the lack of progress in getting Tehran to capitulate to his demands despite months of military engagement. On social media, Trump outlined his plan to bring unprecedented economic pressure on Iran. One pillar of this plan is secondary sanctions and other “TREMENDOUS economic consequences” for any countries doing business with Iran, including oil buyers. China is Iran’s biggest oil export customer. Trump has previously been forced to back down on proposed tariffs on China to avert the consequences of a deepening economic cold war with one of our biggest trading partners.