The president held the company when trillions of dollars disappeared from the stock market over Donald Trump’s tariffs, but he made a quick reversal when the bond market showed signs of trouble.
“My policy will never change,” he said last week that stocks fought. “Cool!” he said they fell further on Wednesday morning – but a few hours later, he announced he had suspended 90 days of “mutual” tariffs. why?
The bond market “feels bad,” Trump told reporters Wednesday.
Usually, when the stock market is a tank, investors flee to the Treasury “safe shelter,” prices rise, and yields or market interest rates fall. However, prices fell in both markets as investors were selling stocks and the Treasury Department from Tuesday through Wednesday.
“It’s very rare to see both the stock market and the Treasury making negative price movements at the same time,” Kathy Ewan, professor of finance at the London School of Economics and Politics, told CNN. This “worrisome” development last occurred during the Covid-19 shock in early 2020. “That can’t be ignored,” she said.
One reason for the Treasury sale appears to have been a massive rewind of “basic transactions” in which investors try to make money from the difference between the Treasury prices and the Treasury futures. This trade involves borrowing large sums of money to buy Treasury debt. The profit margins are small, but they repeat so often that they become a huge cash cow for hedge funds.
But the more troublesome reason is that investors didn’t rush to buy finances like in the past panic.
“If you damage international relations, international investors are less likely to buy your assets, and we saw some of them yesterday,” John Canavan, lead US analyst at Oxford Economics, told CNN.