Why Bond Yields Are Rising
Posted October 30, 2024
In the latest Macro Watch video, we explore why U.S. bond yields are rising, even as the Fed cuts rates.
Former President Trump’s recent gains in the polls are fueling expectations of significant policy shifts that could drive inflation and bond yields higher. As the Wall Street Journal recently reported, “In recent days, bond yields have risen on expectations that Trump will win the presidency and that his new term would bring higher deficits, inflation or both.”
Key Points from This Video:
• Tariffs and Inflation: Trump’s proposed tariffs on imports could increase costs for U.S. consumers by $500 billion to $1 trillion, significantly boosting inflation.
• Globalization Concerns: A retreat from global trade, prompted by increased tariffs, could push inflation and interest rates even higher.
• Debt and Deficits: Trump’s policies could nearly double the government’s deficit increase over the next decade (relative to the policies proposed by Harris), raising borrowing costs and further pushing bond yields higher.
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