Treasury yields are looking much calmer today, with traders and investors holding their nerve after Trump announced a 90-day pause on reciprocal tariffs. And according to this NYT piece, that is what got Trump to reverse course on tariffs yesterday.
Trump got to talking with Bessent, Lutnick, and Hassett just before that and the report suggested that they emphasised growing worries about the health of the broader US financial system to the president.
“Mr. Trump, in particular, understood what the rise in bond yields would mean for banks and their long-term lending, a topic he understands intimately from his years running a real estate company.”
In other words, it wasn’t the stock market that got Trump to fold. It was the bond market.
In all honesty, I just wished we got a full clearance on the implosion of the basis trade. Another bailout here is just going to lead us down the same path again in the future. The bond market is seeing some calm today and yields are not getting out of control, more so than it has been in the past few days.
For some, the damage is already done surely. But the cascading effects are being contained, at least for the time being
