Latest / Best of Business / Liam Dann: NZ Herald business editor at large unpacks what happened to the bond market since Donald Trump's tariffs u-turn

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Liam Dann: NZ Herald business editor at large unpacks what happened to the bond market since Donald Trump's tariffs u-turn · Best of Business

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  Speaker 2: Looks like the bond market ultimately forced Donald Trump's hand
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  Speaker 2: to pull back on those tariffs.
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  Speaker 1: Butun market is very tricky.
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  Speaker 3: I was watching it. But if you look at it now,
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  Speaker 3: it's beautiful. The bond market right now is beautiful. But yeah,
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  Speaker 3: I saw last night where people were getting a little queezy.
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  Speaker 2: So beautiful. Liam dan is the herold's business editor at large,
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  Speaker 2: Liam good evening, Hey, right, what was wrong was where
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  Speaker 2: the bond markets were going.
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  Speaker 3: Well, the yield or the interest rate on the US
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  Speaker 3: Treasury bonds was going up, and it was going up
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  Speaker 3: quite fast, and that was going up. It's sort of
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  Speaker 3: there's an inverse relationship between the price of a bond
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  Speaker 3: and the yield on it, and the price of the
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  Speaker 3: bonds was going down, suggesting that they were being sold
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  Speaker 3: off around the world. A few possible reasons for that.
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  Speaker 3: You know, you've got investors all over the world worried about,
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  Speaker 3: you know, just how safe a bet the US is. Traditionally,
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  Speaker 3: when markets are in turmoil, US treasury bonds are the
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  Speaker 3: safe place to go and so that's been undermined somewhat.
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  Speaker 3: Some people suggesting that the Chinese, who have you know,
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  Speaker 3: about a trillion dollars worth of own about a trillion
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  Speaker 3: dollars worth of US debt or US bonds, maybe selling
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  Speaker 3: them off to to force his hand, to force his hand,
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  Speaker 3: although that would hurt them as well. So it is
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  Speaker 3: kind of a nuclear option because you know, as the
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  Speaker 3: price falls, they lose the value of them, you know,
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  Speaker 3: they lose value, So a bit of that. But either way,
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  Speaker 3: you know, whether it was the Chinese or all of
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  Speaker 3: you know, a whole bunch of the countries, or just
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  Speaker 3: general loss of faith, it was spiking really fast, and
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  Speaker 3: that's a real problem. You know, when you have a
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  Speaker 3: when interest rates go up faster than predicted, companies that
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  Speaker 3: have an amount of debt that might have seemed like
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  Speaker 3: an okay amount of debt suddenly is a problematic amount
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  Speaker 3: of debt. And we saw that in the GFC. In
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  Speaker 3: the overnight lending rates spiked to the point that the
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  Speaker 3: market just froze up and then big banks started falling over.
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  Speaker 3: So you can't let that happen. They often say that
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  Speaker 3: the bond market is, you know, the most powerful political
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  Speaker 3: or financial or economic force in the world. I mean,
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  Speaker 3: the whole world runs on debt and when that seasons up,
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  Speaker 3: things just stop happening.
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  Speaker 2: So that's meant to be the safest of safe right,
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  Speaker 2: that's the.
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  Speaker 3: Same absolutely so so in a way, you know, in
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  Speaker 3: Donald Trump sort of playing poker with with this, the
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  Speaker 3: very idea that the US is the primary safe haven,
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  Speaker 3: you know, that the number one place for you know,
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  Speaker 3: the dominant economy in the world.
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  Speaker 2: And back home, the INSIDETX finished today high was up
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  Speaker 2: three point.
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  Speaker 3: Yeah, about three point four, three point five, So.
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  Speaker 2: They're still not recovering what not recovering.
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  Speaker 3: And yeah, the bond yields, I guess they're looking beautiful now,
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  Speaker 3: they're looking beautiful. They're stable. But the situation we're in,
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  Speaker 3: so there's been a backtrack on the tariffs for all
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  Speaker 3: the countries except China. But the tariff one hundred and
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  Speaker 3: twenty five percent on China and they've got the reciprocal
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  Speaker 3: eighty four percent. That seems like it just can't stand.
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  Speaker 3: I mean, how does how does the US economy and
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  Speaker 3: the Chinese economy function with those tariffs? Not very well,
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  Speaker 3: I would have thought, And that's going to be huge
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  Speaker 3: fallout for the world. So really they have to get
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  Speaker 3: to the negotiating table. But there's obviously a lot of
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  Speaker 3: you know, pride and that they have to get there
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  Speaker 3: and save some face. So Donald Trump doesn't want to
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  Speaker 3: look like he's back down against the Chinese. I'm sure
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  Speaker 3: Jijinping doesn't want to look like that either. But it's
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  Speaker 3: problematic if this goes from a sort of a sort
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  Speaker 3: of feels through surreal at the moment, because we yet
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  Speaker 3: to see the reality of these tariffs hitting consumers and
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  Speaker 3: hitting the manufacturers. But that's going to happen in the
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  Speaker 3: next few days if something doesn't give.
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  Speaker 2: William Dan appreciate your analysis as always ends it here
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  Speaker 2: or Business editor at
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