Trump's Liz Truss moment?

Mid-week market update: Is this Donald Trump's Liz Truss Moment? In the fall of 2022, UK prime minister passed a series of unfunded tax cuts. The bond market rebelled and sold off hard, especially in the long end of the yield curve. The massive sell-off forced a number of "hedged" pension funds into technical insolvency, which eventually led to the political downfall of the prime minister.

 

Here is where we stand today. The 10-year Treasury yield and other long yields have spiked. The MOVE Index, which is the VIX of the bond market, is up sharply. The yield curve is has marginally recovered from inversion, but nevertheless indicates tight monetary conditions. The trade war factor, which measures the performance of stocks with domestic revenues relative to the S&P 500, has surged.

 

Even as investors fret about how tariffs are affecting the stock market, the real action is in the bond market.

 

The full post can be found here.

 

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