Liam Dann: NZ Herald business editor at large unpacks what happened to the bond market since Donald Trump's tariffs u-turn

Reports indicate the bond market ultimately prompted Trump to pull back on his stream of tariffs.

The US President announced on social media that he paused tariffs against 75 countries for 90 days - with China being a notable exception.

NZ Herald business editor Liam Dann explained further - and unpacked the market reactions since Donald Trump made his u-turn.

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Episode Transcript

Speaker 1 (00:00):
Looks like the bond market ultimately forced Donald Trump's hands
to pull back on those tariffs.

Speaker 2 (00:04):
Un market is very tricky. I was watching it. But
if you look at it now, it's beautiful. The bond
market right now is beautiful. But yeah, I saw last
night where people were getting a little queezy.

Speaker 1 (00:18):
So beautiful. Liam dan is the Herold's business editor at large.
Liam good evening, Hey, right, what was wrong was where
the bond markets were going.

Speaker 3 (00:25):
Well, the yield or the interest rate on the US
Treasury bonds was going up, and it was going up
quite fast, and that was going up. It's sort of
there's an inverse relationship between the price of a bond
and the yield on it, and the price of the
bonds was going down, suggesting that they were being sold
off around the world. A few possible reasons for that.

(00:47):
You know, you've got investors all over the world worried about,
you know, just how safe a bet the US is. Traditionally,
when markets are in turmoil, US treasury bonds are the
safe place to go, and so that's been undermined somewhat.
Some people suggesting that the Chinese, who have you know,
about a trillion dollars worth of own about a trillion

(01:08):
dollars worth of US debt or US bonds, maybe selling
them off to to force his hand, to force his hand,
although that would hurt them as well, So it is
kind of a nuclear option because you know, as the
price falls, they lose the value of them. You know,
they lose value, So a bit of that. But either way,
you know, whether it was the Chinese or all of

(01:30):
you know, a whole bunch of the countries, or just
general loss of faith, it was spiking really fast, and
that's a real problem. You know, when you have a
when interest rates go up faster than predicted, companies that
have an amount of debt that might have seemed like
an okay amount of debt suddenly is a problematic amount
of debt. And we saw that in the GFC when

(01:53):
the overnight lending rates spiked to the point that the
market just froze up and then big banks started all over.
So you can't let that happen. They often say that
the bond market is, you know, the most powerful political
or financial economic force in the world. I mean, the
whole world runs on debt, and when that seasons up,

(02:17):
things just stop happening.

Speaker 1 (02:18):
So that's meant to be the safest of safe right,
that's the.

Speaker 3 (02:21):
Same absolutely so, so in a way, you know, in
Donald Trump sort of playing poker with with this the
very idea that the US is the primary safe haven,
you know, that the number one place for you know,
the dominant economy in the world.

Speaker 1 (02:38):
And back home, the INSIDEX finished today high was up
three point.

Speaker 3 (02:42):
Yeah, about three point four, three point five.

Speaker 1 (02:43):
But they're still not recovering what I'm not recovering.

Speaker 3 (02:46):
And yeah, the bond yields, I guess they're looking beautiful now,
they're looking beautiful. They're stable, but the situation we're in,
so there's been a backtrack on the tariffs for all
the countries except China. But the tariff one hundred and
twenty five percent on China and they've got the reciprocal
eighty four percent. That seems like it just can't stand.
I mean, how does how does the US economy and

(03:09):
the Chinese economy function with those tariffs? Not very well,
I would have thought, and that's going to be huge
fallout for the world. So really that they have to
get to the negotiating table. But there's obviously a lot
of you know pride pride, and that they have to
get there and save some face. So Donald Trump doesn't
want to look like he's back down against the Chinese.
I'm sure Jijinping doesn't want to look like that either.

(03:31):
But it's problematic if this goes from a sort of
a sort of feels through surreal at the moment, because
we yet to see the reality of these tariffs hitting
consumers and hitting the manufacturers. But that's going to happen
in the next few days if something doesn't give.

Speaker 1 (03:47):
Lilliam Dan appreciate your analysis, as always ends in here,
Business Editor at Large.

Speaker 3 (03:51):
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