Trump's new favorite success indicator
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The stock market no longer appears to be President Trump's go-to yardstick for success. Bond yields, not the Dow, are the administration's new North Star.
Why it matters: The administration now sees bond yields — which determine long-term interest rates across the economy — as a real-time gauge of investors' confidence in its fiscal agenda.
- The White House says its policies should help engineer lower rates for consumers and businesses, regardless of what the Federal Reserve does in setting short-term interest rates.
What they're saying: "We are paying particular attention to the 10-year Treasury rate, which I believe should naturally come down because of President Trump's policies," Treasury Secretary Scott Bessent said at an investor summit Tuesday.
- Bessent added that he believes interest rates would also fall as the administration solved the "affordability crisis."
- "One way to tell whether markets think 'are we getting inflation under control' is to look at longer-term interest rates," Kevin Hassett, the director of Trump's National Economic Council, told CBS last week.
Where it stands: Bond yields have plunged in recent weeks, reversing a run-up after the election.
- The yield on the 10-year Treasury bond was 4.3% on Wednesday morning, about half a percentage point below its recent peak in early January.
- This is a huge move in a short period of time. The bond market is historically more slow-moving and steady than volatile stocks.
Yes, but: The problem with using the stock market as a gauge of success is how quickly gains can vanish. In the bond market, the administration is seeing yields move in the desired direction, though the reason behind the drop is potentially worrying.
- The bond rally — higher bond prices mean lower yields — appears to be the result of economic growth jitters, driven at least in part by the Trump trade agenda.
- Closely watched survey data suggests softer sentiment, with consumers and businesses calling out tariffs as a reason for caution. The fear is that tariffs might not be as inflationary so much as they will weigh on economic growth.
The intrigue: When Trump references lower rates online or in press conferences, he is not necessarily trying to pressure the Fed to lower rates.
- One day after taking office, Trump told reporters that cheaper energy would "knock out a lot of the inflation. That's going to automatically bring the interest rates down."
