Investors are freaking out about the US economy, dumping over $10 billion in US bonds in just three months. This massive selloff marks a huge shift, ending a five-year trend of investors buying up these bonds.
What’s Going On?
The Financial Times reports this bond exodus is driven by worries about rising inflation and a massive increase in government debt. One expert, Robert Tipp, a top fixed-income strategist, says the situation is making investors nervous, especially about long-term bonds. He points to high inflation and a seemingly endless stream of government spending as the culprits.
The “Big Beautiful” Spending Bill
This bond sell-off comes right after the passage of a massive spending bill. This bill raises the debt ceiling by a whopping $5 trillion, makes permanent tax cuts from 2017, increases spending on defense and border security, and cuts some social programs. While the administration claims it will boost the economy, the Congressional Budget Office (CBO) predicts it will add roughly $3.5 trillion to the national debt over the next ten years. The Treasury Secretary is optimistic, predicting massive economic growth that will offset the increased debt.
The Bottom Line
The situation is pretty volatile. Investors are clearly worried about the future of the US economy and the impact of this massive spending bill. Whether their fears are justified remains to be seen.