Bombing the bond market

Rob Armstrong (0:00)

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Katie Martin (0:54)

PUSHKIN Bond investors, be afraid, because Donald Trump, the most powerful man on the planet, has issued a warning. Fall into line or we'll bring in the military?

Listeners you may think I'm either losing my mind or exaggerating for effect. Frankly, I have to pinch myself sometimes. But no, a proper battle has broken out in the bond market, and if we don't find a way out of it, we're all in trouble. The man at the center of all this is Scott Bessent, the US Treasury Secretary. He's been doing some pretty unusual stuff lately, to put it mildly, all designed as a show of immense American strength with rock solid US government bonds right at the center. The problem is, investors are reading it all as a huge sign of weakness, a thinly disguised plea for help. Something here has got to give. And in the meantime, this is some proper old school markets cage fighting. They on the show, bonds are at war, and we are here for it.

This is Unhedged, the markets and finance podcast and the Financial Times and Pushkin. In the great bond war of 2026, I am First Officer Katie Martin, a markets columnist in the fortified bunker of FT Towers in London. Joining me down the line from New York City, Rear Admiral Rob Armstrong, the big fella is back. Rob, are you feeling refreshed and reinvigorated and ready for action?

Rob Armstrong (2:24)

I had a great vacation. I went to Canada and started a trade war. So...

Katie Martin (2:31)

It's all your fault.

Rob Armstrong (2:33)

In fact, it is. And what's more, in Canada, I actually saw a bear, which is possibly the most Canadian thing you can do.

Katie Martin (2:42)

Was it a black bear or a brown bear? Because one of them you're supposed to run away from.

Rob Armstrong (2:45)

No, it's a grizzly bear. Black and brown are fine. Grizzly bear, you run away from.

Katie Martin (2:49)

I think I would just run away anyway.

Rob Armstrong (2:51)

Polar bear, you just say your prayers and it's over. In any case, it was a good trip.

Katie Martin (2:55)

Yeah. So bears aside, you missed not all of the fun in the bonds battle, but a lot of the fun, some of the opening skirmishes of the bonds war.

Rob Armstrong (3:06)

Yes.

Katie Martin (3:07)

I want to start this whole story for listeners in possibly the stupidest place in the middle.

So last Friday, Bessent had launched one of his interventions in the bond market in an effort to pull down borrowing costs. We'll explain what all that means in a minute, but it hadn't really worked. And a reporter asked the President of the United States about it. And this is what he said. Do you direct Secretary Bessent to intervene in the bond market?

Rob Armstrong (3:35)

No, not at all.

Katie Martin (3:37)

No, he's a very capable man. He wanted to do it. Have you talked to him about another type of intervention? Is that something he will be doing?

Rob Armstrong (3:43)

We have many types of intervention. That's one.

Katie Martin (3:46)

The ultimate intervention is our military. And if we have to use that, we will, yeah.

Rob Armstrong (3:51)

That is so weird.

I mean, that's actually, philosophically, there's an interesting question here, is if you wanted to bomb the bond market, what do you bomb exactly? Do you bomb the Treasury itself? Or like the place they trade the bonds? Or is it more, maybe it's not bombed, maybe it's soldiers, like you're actually sending soldiers fanning out to investment banks across the world to bond trading decks with rifles.

Katie Martin (4:18)

Yes. And, you know, to point them at the discount window. Yeah.

I mean, it does raise some interesting questions. You know, are they going to send Navy SEALs into the steepener trades or hold a gun to people's heads and make them buy the bonds? Anyway, I found this extremely amusing on Saturday morning when I woke up and had about a million messages.