NEW YORK (AP) — Wall Street’s quiet corner is making noise again.
While the bond market is typically seen as slower moving, it can pack a heavy punch when it’s alarmed. And right now, it’s getting worried about how much more Washington is preparing to pile onto its spiraling mountain of debt because of its desire to cut taxes.
The House of Representatives approved a bill of tax breaks early Thursday that could add trillions of dollars to the federal government’s debt, and it’s heading to the Senate next. Worries about the U.S. debt have sent yields jumping in the bond market, which in turn has shaken the stock market. The S&P 500 is potentially heading toward its worst week in seven.
In the past, angry reactions from the bond market have been so strong that they’ve forced governments to backtrack on policies and even led to the ouster of some political leaders. To be sure, many veteran investors say it would be overblown or at least premature to say “bond-market vigilantes” are rounding up this time around, because yields have not jumped high enough to indicate a crisis. But the higher yields will nevertheless have wide-reaching effects.
“I wouldn’t look at this from an apocalyptical dynamic, but there are real ramifications,” said Nate Thooft, a senior portfolio manager at Manulife Investment Management. “Look at mortgage rates.”
