US Government Bonds Decline Amid Rising Concerns Over Trump’s Tax Bill: What You Need to Know

Long-term US government bonds and stocks took a hit recently, sparking worries among investors about President Trump’s tax plan. The yield on 30-year Treasuries rose to 5.096%, its highest since late 2023, as bond prices fell. The S&P 500 index also dropped by 1.2%.

The decline came as Congressional Republicans worked to push Trump’s tax proposal toward a vote. Analysts warn that this plan could increase US debt by at least $3 trillion over the next decade, fueling investor anxiety. Last week, Moody’s downgraded the US’s credit rating, removing its last triple-A status.

On Wednesday, a $16 billion auction for 20-year Treasuries saw weak demand. Primary dealers, who are supposed to buy any unsold bonds, only picked up 16.9% of the offering, which is slightly above average but still concerning. Ian Lyngen from BMO Capital Markets noted that this lack of enthusiasm for Treasuries points to a trend of rising yields.

Pooja Kumra, a strategist from TD Securities, stated that investors are cautious about long-term securities given the current budget discussions. One hedge fund manager described the auction as "nasty," indicating widespread discomfort in the market.

In the stock market, over 90% of S&P 500 stocks saw losses. The financial, real estate, and healthcare sectors were particularly hard hit.

The decline wasn’t limited to Treasury bonds; Big Tech was also impacted. OpenAI’s recent acquisition of Jony Ive’s hardware company for $6.4 billion, aimed at diversifying away from smartphones, coincided with the negative sentiment. Major tech stocks like Apple and Amazon dropped by about 2% and 1.1%, respectively.

Across the board, the dollar index fell by 0.6%, reflecting a broader uncertainty in the market.

In today’s fast-paced economic landscape, experts recommend keeping a close eye on such trends. As the financial circumstances evolve, understanding these dynamics can help investors make better-informed decisions. For more detailed insights, you can refer to this Moody’s report on credit ratings.

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