Global Bond Sell Off Accelerates After Trump Tax Bill Passes House

A significant sell-off in global bond markets has gained momentum following the passing of President Trump’s sweeping tax bill through the US House of Representatives. The controversial legislation, which adds an estimated $3.8 trillion to America’s debt pile over the next decade, has sparked fresh concerns among investors about the country’s fiscal sustainability.

The Republican-controlled House narrowly passed the bill, which is expected to weigh heavily on an already substantial $36 trillion national debt. This development has put additional pressure on the so-called “US exceptionalism” trade, especially after Moody’s recently downgraded the country’s credit rating from its once-coveted triple-A status.

Yields on 30-year US Treasury bonds rose to 5.13 per cent, marking their highest level since 2023, while 20-year yields climbed further to 5.14 per cent. The increases are indicative of bondholders demanding higher returns to compensate for what they view as growing risk in lending to the government. European bond markets mirrored this turmoil, with German 20-year bond yields hitting their highest point in two months.

In equity markets, the impact was also palpable. Both the S&P 500 and Dow Jones Industrial Average opened markedly lower after substantial drops on Wednesday. The decline was triggered by weak demand at an auction for US 20-year Treasury bonds, further exacerbating market anxiety.

The American dollar saw a modest rebound of 0.2 per cent against major currencies after three consecutive days of losses. Yet the currency remains 10 per cent weaker since its January peak and has shed 5 per cent of its value since Trump introduced new tariffs in April, a period he earlier proclaimed as “Liberation Day”.

Cryptocurrency markets, on the other hand, have surged. Bitcoin reached its highest-ever value at $111,223.70, a 19 per cent rise since the beginning of the year. Anticipation of forthcoming US stablecoin regulation is seen as a key driver for further mainstream adoption of cryptoassets.

State Street Global Markets strategist Michael Metcalfe commented on the situation, noting the duality of market sentiment. “While fiscal stimulus should allay recession fears, it raises unresolved concerns regarding fiscal sustainability,” he observed. ING’s Francesco Pesole echoed this sentiment, warning that the tax bill reflects a precarious approach to deficit management that is unsettling both equity and bond markets.

This co-ordinated sell-off in US assets has prompted renewed scrutiny of US fiscal policy, with analysts closely monitoring the dollar as an indicator of market confidence in the government’s strategy moving forward.