The bond market has once again sounded the alarm on Donald Trump's mandate, as it did in early April when it triggered a trade war that is currently on hold (until early July, presumably). The latest news from an increasingly volatile fixed-income market is that long-term bond yields continue to soar. This is a result of price declines, meaning the sales that investors have been making of the traditional US Treasury bond for weeks now. The market's focus is currently on the 30-year debt, which is facing increasing demands. It surpassed the 5% mark last Monday and this Thursday it reached highs above the 5.1% level, levels not seen since 2007, during the financial crisis. Since the day after 'Liberation Day' on April 2, its yield has risen by almost 70 basis points, from 4.4%, a significant move for the bond market, which is traditionally much calmer than the stock market.
What's behind this? An inevitable fear that US debt, which exceeds $36 trillion, will spiral out of control and that the deficit will exceed the estimated 7% for this year after the US Congress gave green light to Trump's new tax plan. With a majority in favor, the US House of Representatives approved the budget bill on Thursday, combining tax breaks and significant cuts in public spending, which, according to critics, threaten to dismantle healthcare coverage and increase the country's debt. The tax reform megapackage, dubbed by Trump as 'Big, Beautiful Bill,' which still needs to pass through the Senate, demands significant cuts in federal spending, particularly in the Medicaid program, the extended health insurance established by the Democrat Barack Obama's government (2009-2017) and relied upon by over 70 million low-income Americans. However, what is truly concerning the market are the tax breaks included in the plan, which could escalate the country's debt. It is estimated that, along with other tax measures, the federal deficit could increase by over $4.8 trillion in the next decade in a country that has the ability to print money without control, as it is not accountable to anyone.
This is the latest move by the Trump Administration that is unsettling the bond market, where there has been a constant massive capital outflow for weeks, clearly showing how the US is voluntarily relinquishing its status as a financial safe haven. Neither debt nor the dollar inspire confidence in investors who are seeking refuge elsewhere, such as in Europe, for example. Another signal sent by investors occurred during the auction held late Wednesday in the US for 20-year debt. The demand from savers (banks, funds, and institutions primarily) was the lowest since February, according to data from the US Treasury Department. With a yield of 5.047%, $16 billion were placed with a demand of nearly 2.5 times (close to requests worth $39.4 billion).
TheT-Note, the world's most popular bond, is currently at 4.6%. These levels are still below the 4.79% reached earlier this year, but it is the only previous reference point that, if surpassed, would also lead to a tension not seen since the financial crisis that followed the Lehman Brothers' collapse.
Today's market scare is just a reflection of the earthquake caused by the Moody's rating agency over the weekend when it downgraded the US debt rating, a significant symbol. Last Friday, during European trading hours, the agency lowered the rating from triple AAA to Aa1. This was not the first time, as its decision joins those of the other two global giants: Fitch, which downgraded the US rating in 2023, and Standard & Poor's in 2011.
The consequences of investor nervousness are also being felt in the American stock market, which has been struggling to turn positive in recent sessions, with little success. This is remarkable considering that Europe is trading at historic highs, with gains in 2025 exceeding 20%, including the Spanish stock market.