Trump Blinks on Rates as Bond Market Takes Aim at His Inflation-Fighting Hopes

The bond market has turned against President Donald Trump as the 30-year US Treasury yield hit its highest level since 2007, reaching 5.20%. This move is part of a global selloff in sovereign debt markets driven by rising inflation and a surge in energy prices due to the Iran war.

Trump's earlier expectations for quick rate cuts under incoming Fed Chair Kevin Warsh have been tempered as he told Fortune magazine that rates can't be evaluated until the war is over. Trump also said he would let Warsh do what he wants, indicating a shift in his stance on interest rates.

The inflationary surge has pushed CPI inflation to above 4% and is forecasted to reach 6% this quarter. This has led to a dramatic repricing of the Fed's reaction function, with traders now attaching an 80% probability to a rate hike by December.