Rising Pressure in Long-Term Bond Markets
Recent bond auctions in Japan and the US underperformed significantly, exposing cracks in long-term debt demand.
Governments are issuing more long-term debt than markets are willing to absorb, driving yields to multi-decade highs in the US, UK, Japan, and Europe.
Traditional buyers like pension funds and insurers are pulling back, while central banks are offloading pandemic-era bond holdings.
Market pushback is increasing. The term “bond vigilantes” is resurfacing as investors demand greater fiscal discipline.
Notable voices (e.g., Jamie Dimon, Larry Fink, Ken Griffin, Elon Musk) are warning about potential cracks in the Treasury market and unsustainable deficits.
Responses vary: some governments are shifting to short-term debt issuance, while others are reducing long-dated bond offerings or considering buybacks.
Yield curve steepening reflects persistent inflation expectations and fiscal concerns with implications for sovereign, corporate, and household borrowing costs.
If you're interested in understanding the dynamics behind rising yields, you can check out one of Rationale's previous memos through the link.
Trump–Musk Clash: Political Risk Enters the Market
A public fallout between Donald Trump and Elon Musk erupted over a new federal spending bill.
Musk: Called the bill a “disgusting abomination” and urged the public to “Kill the Bill,” criticizing the rollback of EV tax credits.
Trump: Accused Musk of being self-interested and threatened to pull federal contracts and EV subsidies.
Escalation: Musk accused Trump of being “in the Epstein files” (later deleted) and floated launching a new political party.
Market impact: Tesla stock fell ~14–16%, wiping billions in market cap.
This episode underscores how high-profile political disputes can create headline risk and spill over into asset prices and investor confidence.
Labor Market Update
There are no signs of a sudden recession in the headline NFP data. The revision from 277K to 147K for the previous figure seems more important.
There was a downward revision of 95k in the prior two months’ figures.
The ADP data continues to suggest a soft landing, not a sharp recession.
Weekly unemployment claims and recent layoff announcements further support this softening labor market view
Slower hiring in key sectors, falling participation, and rising unemployment support the idea that the labor market is cooling.
This gives the Fed more confidence to consider a rate cut in the second half of the year if inflation continues to ease.
Best,
Roy Gulluoglu
Founder, Rationale