Why Trump's “large, beautiful” tax bill is worrying bond investors

For decades, Budget Hawks warned that America's debt was not sustainable and that the money financed with borrowed money would finally put off investors from loans to the United States. These fears are now being captured more on the bond market and are at risk of spreading further.

The tax cuts preceded by the Trump administration increase debts and deficit problems among bond investors, a strong group of market participants who emphasize how much it costs for the government to finance their budget. The purchase and sale of state debts, which are referred to as government bonds, also influences interest rates to a large number of debts that have been extended to American households and companies, including mortgages, credit cards and car loans.

These investors were already on the rise through President Trump's Whipsawing tariff policy. Then the attempt this week to take the tax cuts without significantly reducing the expenditure – which the President described as a “large, beautiful calculation” – triggered a new turbulence for the bond market. Mr. Trump exerted more pressure on the legislators of the Republicans on Tuesday, visited Capitol Hill and warned that the non -regulations of the legislation would lead to higher taxes.

Since the withdrawal of less than 4 percent in early April, the 10-year-old state treasury has increased near 4.5 percent, a big step that reflects deficit worries. The movements for the 30-year return this year were also strong: it rose over 5 percent on Monday, its highest level for about a year and a half.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, warned on Tuesday with reporters with reporters that volatility on the financial market could already increase increased uncertainties about economic prospects.

This risks to “make people even more careful about how they are committed,” he said. “If that happens, I have to judge to what extent this should change my prospects of how the economy will do.”