- President Trump’s “big beautiful bill,” featuring tax cuts and increased spending, has rattled bond markets due to fears it will sharply increase U.S. national debt. Wall Street analysts are now questioning America’s status as a financial safe haven. But stocks were relatively calm this morning, before the market opened.
Global stock markets were relatively quiet this morning prior to the opening bell in New York. But the calm is an eerie one — all eyes are on the bond market, which is signalling, loudly, that it does not like President Trump’s “big beautiful bill” because it will likely increase the U.S. national debt. The bill has passed the House and is now heading to the Senate.
The Treasury Department’s auction of $16 billion in new 20-year bonds should have been routine. But the yield on those Treasuries (the amount investors demand for buying the bonds) rose from 4.6% to 5.05% — a signal that the market is very much not in the mood for more U.S. debt.
“These auctions typically don’t make headlines, but this one sparked investor concerns about growing uncertainty in U.S. economic policy—particularly whether the market can absorb the refinancing of nearly $3 trillion in U.S. debt maturing in 2025,” Convera’s Kevin Ford told clients in a note seen by Fortune this morning. “While the 20-year bond isn’t as liquid as other maturities, the lack of demand raised red flags in the market.”
Saxo Bank’s Charu Chanana agreed: “The bond market is sending out distress flares. Yields are climbing—but instead of strengthening the U.S. dollar, they are coinciding with a weaker USD. For investors, this isn’t a vote of confidence in U.S. growth. It’s a sign that something may be breaking beneath the surface.”
Bond analysts don’t normally write stuff like this. Bond trading is supposed to be boring.
Their vocal worrying is triggered by the progression of President Trump’s “big, beautiful bill” from the House to the Senate. The tax cuts and spending in the bill would increase U.S. national debt to 134% of GDP, according to Moody’s, which recently downgraded the quality of that debt.
“People are getting fed up. It’s clear that there are no adults in the room in Washington. Zero. No accountability,” John Fath of BTG Pactual Asset Management, told Bloomberg. “You have to ask yourself, what is it going to take? It’s going to be the price action.”
Vincent Mortier, chief investment officer at asset manager Amundi, told the Financial Times: “The US is no longer the ultimate and only perceived safe haven … The country has become the home of extreme fiscal undiscipline.”
Even the calm voices are predicting macro doom. “With very rare exceptions, the Moody’s downgrade of US debt should have no impact on the ability of institutional investors to continue to own US Treasury bonds,” Lotfi Karoui and her team at Goldman Sachs told clients. “We are, of course, mindful that the combined effect of a challenging fiscal outlook and the upcoming stagflationary shock from tariffs will likely continue to put a floor on the term premium. But a material slowdown in growth would, in our view, eventually push yields lower.”
Here’s a snapshot of the action prior to the opening bell in New York:
- The S&P 500 closed flat at 5,842.01 yesterday.
- Coinbase rose 5% on the day, buoyed by investor enthusiasm around the president’s “crypto dinner.”
- S&P futures were flat this morning prior to the open.
- Bond yields spiked on worries about the fiscal stability of the U.S. The 10-year Treasury hit 4.63% and the 30-year Treasury hit 5.15%.
- India’s Nifty 50 was up 1% this morning.
- Japan’s Nikkei 225 was up 0.5%.
- The Stoxx Europe 600 was up 0.3% in early trading.
