After a spike in U.S. bond rates forced then-President Bill Clinton to back down from his spending plans in 1993, James Carville, one of his top advisers, told The Wall Street Journal, “I used to think, that if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
For the next couple of decades, interest rates on U.S. government debt fell and stayed down. It seemed like the bond market had abdicated its role as a great legislative bully.
Well, the bully is back. It’s already won its first fight with the Trump administration, over tariffs — and this week, it is clearly squaring up for another battle over the House GOP’s massive tax cut and spending package.
The bond markets’ initial victory came when President Donald Trump suspended the tariffs he announced on April 2 just hours after they went into effect on April 9. Why the almost immediate cave? Here’s what the president said: ”I was watching the bond market. The bond market is very tricky. I was watching it. But if you look at it now, it’s, it’s beautiful. The bond market right now is beautiful. But yeah, I saw last night where people were getting a little queasy.”
