Trump calmed the stock and bond markets for now. The key issues still remain.
In two days the 30-year long bond yield jumped 66.8 basis point. That’s pretty much a crash. And the equity market futures were crashing as well.
This was largely in response to Trump’s tariffs and the retaliation by China to go toe-to-toe with Trump.
Trumped Waved the White Flag
Amid the turmoil, Treasury Secretary Scott Bessent convinced Trump to do a 90-day pause.
The stock and bond markets instantly reversed and the Dow shot up nearly 3,000 points, about 7.8 percent. The Nasdaq rose 1,857 points up 12.2 percent, and the S&P 500 rose 474 points up 9.5 percent.
Administration Lie of the Day
The nonsense of the day is this was all planned.
I discussed the 5D chess idea in Administration Lie of the Day: “Trump Goaded China into a Bad Position”
Bessent: “This was driven by the President’s strategy. He and I had a long talk on Sunday and this was his strategy all along. And you might even say that he goaded China into a bad position. It wasn’t a hard message. Don’t retaliate and things will turn out well.”
Treasury Secretary Bessent is a bad liar. Clowns portray it as 5D chess.
Look, you don’t plan to crash the stock and bond markets as some sort of chess game.
Bessent convinced Trump to call off tariff madness for 90 days.
Beautiful Bond Market
Fox News reports Treasury Secretary Scott Bessent denies that tariff pause is due to market declines
“It is just a processing problem,” Bessent said when asked if the market whiplash was a catalyst for the pause. “Each one of these solutions is going to be bespoke. It is going to take some time, and President Trump wants to be personally involved, so that’s why we are hitting the 90-day pause.”
Meanwhile, Bessent questioned claims from reporters that the bond market was “cratering” and said the information in front of him did not indicate as much. Trump, who also fielded questions Wednesday about the market volatility following his tariffs, similarly described the current bond market as “beautiful.”
The Lies and Spin Continue
- It is just a processing problem.
- The bond market is beautiful
Competing Theories
- Trump concocts ridiculous definition of “reciprocal” to goad China into retaliating. Socks and bonds crashed in response. This is a 5D chess planned idea.
- Trump capitulated with a 90-day pause reacting to the plunge in stock and bond markets.
Fact check: Trump “I was watching the bond market. The bond market is very tricky. I was watching it. But if you look at it now, it’s… it’s beautiful. But, yeah, I saw last night where people were getting a little queasy.”
Trump’s Contradictory Claims
- Tariffs will increase revenue enough to balance the budget
- Tariffs will bring manufacturing back to the US
- Tariffs will reduce inflation
- Tariffs will increase exports
Conflicting Economic Madness
Points 1 and 2 conflict. Tariffs cannot simultaneously bring back manufacturing and raise enough revenue to balance the budget.
Points 2 and 3 conflict. Since the US is one of the world’s highest cost producer of goods thanks to unions, tariffs will not reduce inflation.
Points 2 and 4 conflict. Since the US is one of the world’s highest cost producer of goods, and other countries will retaliate, tariffs will not increase exports.
Which point do you want because you don’t get all four. And don’t choose #1 either.
That idea is downright idiotic although you can get some revenue because tariffs are a tax hike.
Role of Hedge Funds
Obviously tariffs played a central role but there’s more to the Bond Market Rout.
“It’s a global deleveraging,” says Dan Ivascyn, chief investment officer at Pimco, the bond powerhouse. “Markets aren’t fans of extreme uncertainty—unless we get clarity about tariffs, and the willingness to negotiate or be more gradual in implementation, people will likely continue to take their money home.”
Typically, when they are worried about the outlook for U.S. growth, they sell stocks and buy Treasurys. Those are seen as safe and dependable investments, while the dollar has offered similar stability.
In recent days, however, investors have sold bonds and the dollar, along with stocks, amid concern about the unpredictable fallout from Trump’s stunning move to upend global trade.
Once bond prices started falling, the move was accelerated by selling from hedge funds, who have become an increasingly important player in the Treasury market, investors and traders said.
One popular hedge-fund trade in recent months has been to bet on a narrowing gap between Treasury yields and rates on interest-rate swaps. That wager was based on the idea that the Trump administration would change regulations to make it easier for banks to hold Treasurys. But it was upended when yields started surging in recent days.
“If these policy moves hold, we are very likely to have a recession, and stocks and credit—including private credit—are still not priced for that scenario,” says Ivascyn of Pimco. “There is some time to pause and negotiate to avoid these near-term outcomes, but the window is closing.”
China Not Dumping
I was watching futures when stocks and bonds were gyrating wildly. In a matter of minutes Dow futures were swing 500 points in each direction. The 30-year long bond gyrations were also massive.
The “China Is Dumping” treasuries theories were running rampant on Twitter.
I explained China dumping was a bad theory, but the volatility was such I was wondering who knew what. Now we know.
Expect to hear some hedge funds were carted out over this action.
Who Knew What When?
Three Reasons Bond Yields Took Off
- The bond market thought Trump’s massive tariffs would be highly inflationary, more like stagflationary actually.
- The Senate passed a budget bill with no cuts. Budget cuts to be announced later. Yeah right.
- In February, the Trump administration announced an 8 percent cut in defense spending. Trump just reversed that to a 12 percent increase. Massive budget deficits are coming.
On top of those fundamentals Hedge funds were blowing up with their bond market bets.
Q: So what’s been fixed?
A: Nothing.
This is all part of Trump’s brilliant play.
Q: How long will the 90-day pause last?
A: Hmmm
Related Posts
April 9, 2025: Trump Capitulates with a 90-Day Pause on Tariffs, DOW Jumps 2,200 Points
Trump has had enough of the stock market decline.
March 12, 2025: Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
Lutnick: “We’re going to make the External Revenue Service replace the Internal Revenue Service.”
Bessent saved Trump’s ass.
And now that tariffs on Vietnam are back down to 10 percent, expect to see more “Made in Vietnam” stickers on Chinese goods.
What a 5D clown show.
Meanwhile I await the budget analysis of this: Trump Promises $1 trillion in Defense Spending for Next Year