As President-elect Donald Trump gears up to take office, his Republican colleagues in Congress are voicing concerns that his ambitious tax-cut plans could be undermined by the escalating bond yields.
What Happened: House Republicans recently convened in a private meeting on Capitol Hill, where they voiced concerns about the potential $4 trillion price tag for extending the 2017 Trump tax cuts over the next decade, reported Reuters on Thursday. The GOP worries that this could put additional strain on the U.S. government's ability to handle its growing $36 trillion debt, which is expanding by $2 trillion each year.
“The buyers of our bonds are getting nervous that we’re at the point that we cannot pay it back. That affects every one of us,” Rep. Ralph Norman (R-S.C.) stated to the press.
The U.S. bond market is closely monitoring the incoming Trump administration and its Congressional allies, who are preparing to implement a sweeping agenda that includes deporting illegal immigrants and introducing new tariffs on imports. Additionally, Congress is facing a mid-year deadline to address the nation's debt ceiling, or else risk a default.
Why It Matters: The U.S. Treasury yields have surged to their highest levels since November 2023, with the 10-year bond reaching 4.79%. This has prompted calls for Congress to address the nation’s debt ceiling by mid-year or risk a default.
“Congress has to reduce the deficit,” Rep. Andy Barr (R-Ky.) said. “The bond market is telling Congress that if we don’t get our fiscal house in order, everybody’s mortgage rates, everybody’s credit card rates, everybody’s auto loan rates, are going to continue to go up.”
The U.S. bond market has been sending strong signals to Wall Street and Washington, with Treasury yields nearing levels not seen in nearly two decades.
Renowned economist Mohamed El-Erian has warned that U.S. Treasury yields could remain elevated through 2025, citing persistent inflation concerns and shifting market dynamics.
The yield trend comes amid uncertainty surrounding the Federal Reserve’s rate strategy, especially as markets process possible policy changes under the incoming administration. Recent Fed minutes showed that officials used variations of the word “uncertain” twelve times, according to Jeffrey Roach, chief economist at LPL Financial.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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