This week in Bidenomics: Bond market blues

, far beyond forecasters’ expectations. For months, economists have been expecting a slowdown in hiring, and maybe even a recession, since that’s what normally happens when the Federal Reserve hikes interest rates, as it has been doing, to combat inflation.Something feels wrong, all the same. Inflation has come down, from a peak of 9% in June of 2022, to a more manageable 3.7%. That’s obviously good, but consumers are still feeling shocked by price hikes of the last two years.

FILE - Traders work on the New York Stock Exchange floor in New York City, on Tuesday, Sept. 5, 2023. Treasury yields surged in September and sapped the energy from a strong stock market as investors came to terms with the likelihood that interest rates will remain high well into 2024. The yield on the 10-year Treasury jumped to the highest level in nearly two decades.

S&P Global IQ downgraded the US credit rating for the first time ever in 2011. Fitch downgraded the United States in August of this year, andif there’s more fiscal chicanery. And there almost certainly will be more fiscal chicanery now that Republicans have fired House Speaker Kevin McCarthy, making a government shutdown in December more likely and basically halting all budget planning until who knows when.

A three-month surge in interest rates doesn’t automatically doom Biden’s reelection effort. Some economists think rates should ease as inflation continues to decline and the Fed definitively signals it’s done boosting short-term rates. The Fed could even start cutting rates again if a recession blows in. But a bumptious bond market in 2023 could hint at further pain facing some president before long, be it Biden or otherwise.

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Surging Treasury yields upend stock market's 'bond proxies'Soaring Treasury yields have stunned the U.S. equity market in recent weeks, with some of the worst fallout hitting a group of stocks expected to have bond-like qualities. The S&P 500 is down about 4% since the Federal Reserve's hawkish interest rate projections last month sent U.S. yields to 16-year peaks and accelerated an equities pullback from highs reached in late July. While rising yields are generally seen as unfavorable to growth stocks, some of the steepest losses have been concentrated in more staid sectors such as utilities and consumer staples.
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Surging Treasury yields upend U.S. stock market’s ‘bond proxies’Some of the worst fallout has hit a group of stocks expected to have bond-like qualities
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Trend hedge funds come out winners in bond market routA fresh rout in government bonds has sparked alarm across world markets, battering equities. So-called trend following and systematic hedge funds have long positioned for a fall in government bond prices given higher-for-longer inflation. They stand out as winners from the latest bond selloff, with bond yields from the United States to Germany this week hitting multi-year highs as concern about elevated interest rates and high debt levels took hold, derailing stock markets in turn.
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Trend hedge funds come out winners in bond market routExplore stories from Atlantic Canada.
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US bond funds suffer outflows on rate worries\u003B money market funds gain tractionExplore stories from Atlantic Canada.
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