特朗普迎战最棘手对手：债券市场

After Bill Clinton’s plans were derailed by rising borrowing costs in the early 1990s, his chief strategist, James Carville, quipped that if he were reincarnated, he “would want to come back as the bond market – you can intimidate everybody”.Three decades later, Carville’s remarks still ring true.Rising bond yields have a unique ability to exert power over politicians.

Just think of Liz Truss’s mini-Budget crisis and the sackings, about-turns and resignations that followed a surge in borrowing costs. Yet one world leader so far seems immune to the bond market’s menace: Donald Trump.US 10-year Treasury yields have risen from 3.8pc to 4.2pc over the past 12 months, yet the president so far shows no sign of curbing his ambitions.

The latest move that has unnerved investors is Trump’s vow to sack Federal Reserve governor Lisa Cook over allegations of mortgage fraud, which she has denied.It is part of a broader assault on the central bank’s independence as Trump seeks to bend the Fed to his will.The issue is “definitely gaining investor traction”, according to James Bilson, a fixed-income strategist at FTSE 100 fund manager Schroders.

“We are seeing markets begin to price in moves in the direction of institutional weakening – the politicisation of the Fed.”Bond yields fell at the end of last week after Jerome Powell, the Fed’s chairman, hinted rate cuts were on the way.But yields have gyrated this week as Trump has escalated his feud with Cook, who has refused to go and has launched a legal challenge to the president’s dismissal letter.

Investors fear that political capture of the Fed, once Powell’s term of office expires next May, will allow Trump to push down interest rates at the expense of tackling inflationary forces.Ultimately, that will force higher interest rates further down the line to address the problem. “If Trump succeeds, we will get higher expected inflation, which may sound abstract, but it translates into higher interest rates on car loans, mortgages, student loans, business loans, and certainly Uncle Sam will pay more,” former IMF chief economist Ken Rogoff told the BBC this week.

He warned the world faced an “incredibly destabilising” period if Trump succeeded in watering down Fed independence.David Roberts, head of fixed income at Nedgroup Investments, says investors are “extremely worried [about the] politicisation of the Fed”.“Too cheap money will stoke future inflation,” he adds.

In her lawsuit challenging Trump, Cook’s lawyers argued that the president’s power grab at the Fed could do “irreparable harm” to the central bank in the pursuit of “short-term political interests”.The gap between two-year and 30-year US bond yields – the difference in borrowing costs for shorter and longer-term debt – has now reached its widest since January 2022.

The rate on 30-year bonds is closing in on 5pc, even as the two-year slides to 3.6pc, close to its lowest level since 2022.It is a sign of just how concerned investors are about the longer-term inflation threat and the eroding of the Fed’s independence. Rising long-term borrowing costs carry a political risk for Trump.

American mortgage rates are usually tied to longer-dated bonds as householders tend to borrow over longer terms than in the UK or elsewhere.Higher 10-year and 30-year Treasury yields – the return the government promises to pay a buyer of its debt – would therefore hit “Main Street” America rather quickly, harming many Maga voters in the process.

“We think the bond market holds the real leverage,” says Lale Akoner, global market analyst at eToro.“If investors lose confidence that the Fed will defend price stability, or if fiscal deficits balloon despite tariffs, the bond market can punish Washington with higher yields.”For now, US 10-year and 30-year Treasury yields both remain well below the highs hit in April, in the wake of Trump’s liberation day tariffs.

While longer-dated bond yields are moving higher, they are doing so in an “orderly” way, according to Bilson.Robert Dishner, a portfolio manager at Neuberger Berman, says traders have been comforted by a recent report by the Congressional Budget Office that said the president’s tariffs had already brought in $136bn and would reduce the US primary deficit, excluding interest payment, by $3.

3 trillion over the next decade.“The market currently appears to be a bit less fearful of the fiscal [situation] in the US as tariffs have added to government revenues and haven’t necessarily seen big impacts on growth or inflation,” he says.“They are more focused on places like the UK with the autumn Budget coming up as well as the potential for electoral change in France.

”Jason Borbora-Sheen, a portfolio manager at FTSE 250-listed fund manager Ninety One, says: “There’s decent revenue generation coming through from tariffs, there appears to be an acknowledgement of the importance of medium-to-longer dated bond yields.“I think the Federal Reserve attacks are not good, but there are elements of truth.

”Another reason that bond markets may be relatively calm for now may also be because Trump has shown he is vulnerable to their pressure in the past. When markets went into meltdown in the wake of “liberation day”, the president announced a 90-day pause.“During that tariff episode he did pivot back from the most severe version of tariffs when that 10-year yield moved,” Borbora-Sheen says.

“The market has figured out that it matters to him.”While there is relative calm for now, sentiment can turn on a sixpence and attention will now be focused on Cook’s legal case.“If Cook wins, she stays in place and we achieve some semblance of stability,” Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania said in a Substack post.

“If she loses ... that’s the end of Fed independence as it has been constructed and reconstructed over 112 years.”In that case, all hell may break lose – and Trump’s resolve to face down the bond market may be truly put to the test.