Donald Trump’s war with the federal reserve threatens permanent damage to the Treasury

Donald Trump’s words with Jay Powell are likely to lead to permanent damage to the 29 Trio Treasury market, even after the US President retreated with his clear threat to the release of the Federal Reserve Chairman, the senior investors warned.

Trump said this week that he “has no intention” to launch Powell, but he repeated his complaint that feeding He was slow to reduce borrowing costs. With Powell’s term as a president that is scheduled to end in May 2026, this episode has fueled the investor’s concerns about the independence of the Federal Reserve and the American monetary policy path.

“Once you say that, I said that, and while you can walk again, at the back of people’s minds, what is the next surprise?” Andrew Chorutton, chief investment official for fixed income at M & G Investments, said. “If your comfort is about the independence of the federal reserve … it is reduced, then you expect to pay more for that.”

The increasing concerns about the independence of the central bank-with the president submitting his calls to low interest rates in recent weeks and saying the end of a period “cannot come at a speed enough.” Treasury bonds. This yield on the cabinet took 10 years above 4.4 percent this week, heading towards the levels reached on the market on the market earlier this month.

The large investors investors say that there is a remaining fear in the market, about the independence of the Federal Reserve, including whether the president will achieve an unconventional choice to replace the president.

Investors said this was creating the so -called risk premium in the treasury, making them higher than they might be otherwise. Even after recovery, revenue for 10 years reached 4.34 percent on Thursday.

This distinguished investors are paid to hold the treasury bonds due to their high risk compared to the safe German Bunds about 1.9 Celsius, up from less than 1.3 degrees Celsius earlier this month.

The discussion on the independence of the Federal Reserve added to the concerns that have knocked into the prices of treasury in recent weeks, including concerns about government borrowing and the repercussions of Trump’s trade war, as investors are already doubting the state of the American bond market.

William Campbell, a portfolio manager at DouBleline Capital, said that the “excessive access” government in the central bank may risk “erosion” of an essential column of investor feelings and caught similarities with crises in emerging markets, in reference to Turkey’s experience with unconventional monetary policy a few years ago.

He said: “Talking about shooting on Powell makes the market demand more in addition to the risks.” “See what happened to Turkey.”

“A busy record, in terms of stability, is much stronger when the central banks are independent,” Tobias Adrian, the primary official in the International Monetary Fund for Markets, told the Financial Times on Monday.

While he refused directly to Trump’s recent statements on Powell, he added: “Independence provides stability and undermining independence, which we believe will create uncertainty.”

The risk premium on the treasury bonds is usually very low because it is the deepest and most liquid bond markets in the world and is used as a basic global reserve asset.

Robert Tib, head of global bonds in fixed income PGIM, said that policy fluctuations, including pressure on the central bank, were weighing US asset prices through financial markets.

“We have seen this in currency movements, we have seen it in the movements of the relative bonds, we have seen it in the relative stock market (movements). It is accurate.”

Anxiety among investors is that Trump has managed to transform our monetary policy to be more enlarged, in order to achieve his goal of lower interest rates. The bonds that have been assigned will be particularly damaged if the market feels such a shift.

Although Trump has retracted his threats to shoot Powell, analysts have suggested that the president could continue to hinder independence. Matthew Raskin, head of US price research at Deutsche Bank, said that he could nominate an early caliph, as he created a “shadow chair” affecting monetary policy expectations while Powell is still in office.

Speculation has already started between analysts and price investors about who can be chosen, with Kevin Wrash, a former Federal Reserve member who was It is considered For the role of the Treasury, it is seen as a possible alternative. It was a fierce critic workshop for the Federal Reserve Policy last year, but he remained silently silent on recent decisions.

“If he wants to perform the job, he will have to present his most traditional republican monetary views, pledge to Trump and low interest rates,” said Capital Economics in a note before the president retreated. They also appointed Kevin Haysit, director of Trump’s National Economic Council, as another possible alternative.

Campbell of Doublelline said that the appointment of the next Federal Reserve Chairman is “risky”, especially at a time when global investors “began to question the basic foundations of their investments.”

Investment managers have warned that the indication of an unconventional alternative – or the status of the Earth to turn into the policy of the Federal Reserve – may lead to further decrease in bond prices for other bond markets.

“In this environment, it is definitely possible, and it is very difficult for someone to lie on the paths before that locomotive if it seems so,” said Tipp of PGIM. “We are definitely vulnerable to that (risks).”

Additional reports by Claire Jones in Washington