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Bond strategists are cautioning that Donald Trump’s return to the White House carries the specter of currency volatility and rising bond yields, raising concerns that the United States may soon face its own version of Britain’s “mini-budget” problem.
Trump, the incoming president, has promised to implement a slew of pro-growth policies, such as tax breaks, high tariffs, and measures to relax business regulation.
Concerns about a spike in consumer prices have increased due to the former president’s economic plan, which analysts say might lead to major changes in bond yields and investor behavior.
They caution that a situation such to Britain’s 2022 mini-budget crisis is not impossible.
Regarding 10-year U.S. Treasurys, Alim Remtulla, chief foreign exchange strategist at EFG International, told CNBC via email that “foreign central banks and institutional investors, traditional buyers of US 10y Treasurys, are slowly diversifying away from Treasurys on debasement worries attached to concerns over inflation, debt, and geopolitics.”
Therefore, in order to invest in Treasuries, more price-sensitive investors require greater yields. He said, “[The U.S. dollar] is outperforming, so this isn’t at crisis levels yet.” “However, there are concerns that the US may face a currency and yield run similar to what happened in the UK in the fall of 2022.”
