Trump vs. the Bond Market

**SPEAKER_1** (0:00)
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**Ezra Klein** (0:40)
The US. Treasury Market is the most important financial market in the world. Bar none, nothing is even close. Most of us don't participate in it directly. We don't go in the morning and buy Treasury bonds. But Treasury bonds define everything from how the stock market ends up performing to the cost of a mortgage, a car loan, a credit card. There is almost nothing financial they do not touch.
In the US. Treasury Market, it's been looking a little weird lately. The cost of borrowing for the US government is going up, probably because our debt recently passed $40 trillion. We now spend more on interest on that debt yearly than we spend on the entire defense budget.
But also Donald Trump has been more and more erratic.

**Donald Trump** (1:24)
There's never been in history the kind of money coming into a country as we have right now.

**Ezra Klein** (1:30)
His Treasury Secretary Scott Bessent has been making some more aggressive moves into the market.

**Scott Bessent** (1:35)
I think of it as pulling back the slingshot here. We have a lot of potential energy that will turn into kinetic energy.

**Ezra Klein** (1:41)
What is going on with US. Treasuries? Why does the Trump administration seem so freaked out? And what might happen from here?
Robin Wigglesworth is the editor of the Financial Times blog Alphaville. He's co-host of their podcast, A Story of Money and author of the forthcoming book, A Fabulous Debt, The Epic Story of How Bonds Built the Modern World. A quick timestamp here because a lot is happening in the bond markets lately. We spoke on Monday, August 24th.
Robin Wigglesworth, welcome to the show.

**Robin Wigglesworth** (2:18)
Thanks for having me on.

**Ezra Klein** (2:19)
I wanted to begin with this clip of Donald Trump being asked last Friday about Treasury Secretary Scott Bessent's recent interventions in the bond market.

**SPEAKER_6** (2:28)
Did you direct Secretary Bessent to intervene in the bond market?

**Scott Bessent** (2:33)
No, not at all.

**Donald Trump** (2:34)
Now, he's a very capable man. He wanted to do it. He's very good at it. He is a good touch, very good natural touch for the bonds and interests.
He did that. Yeah.

**SPEAKER_6** (2:44)
The yields have come back. Austin said, have you talked to him about another type of intervention? Is that something he will be doing?

**Donald Trump** (2:49)
We have many types of intervention. That's one. The ultimate intervention is our military.
If we have to use that, we will. Yeah.

**Ezra Klein** (2:58)
I'd say that escalated fairly quickly. I've not heard of people trying to use the military against the bond market before. Why don't we start in the more comprehensible part of it before we go there?
What has Scott Bessent been doing?

**Robin Wigglesworth** (3:12)
Well, it feels a little bit like he's doing a bit of a kitchen sink approach to bringing bond yields down.
The core reason is that bond yields, the price of the US government borrowing flows into everything else, and clearly before the midterms, they would like interest rates and bond yields be lower to make affordability better for American households. But in the toolkit that the Treasury Secretary has, there's actually not that much, and Bessent seems to be really trying to use some weird tools for purposes they weren't really designed for.

**SPEAKER_8** (3:46)
Breaking market news for you, the Treasury Department is doubling the size of liquidity support buyback operations that are being used for longer dated nominal coupon securities.

**Robin Wigglesworth** (3:58)
Jacking up the buyback program by a few billion dollars, even 10X-ing it is not going to move the needle, which is why people are scratching the heads of why he would do this and why, frankly, after the initial reaction, Treasury yields have started climbing again.

**Ezra Klein** (4:14)
I think to have this conversation, we need to just set the table on this whole structure that people sometimes see flash buy them on CNBC or in the financial pages but maybe don't have that much familiarity with. So just at the simplest level, what is a US government bond?

**Robin Wigglesworth** (4:32)
The US government bond is a tradable loan issued by the US.
So bonds are just tradable loans. You can buy them, sell them, they pay a fixed interest rate, and they're designed to be able to, you can buy and sell it very quickly, unlike a conventional loan. The US government is the biggest government in the world, it's the most powerful country. It is at the apex of the entire global financial system. So that's why treasuries are so important, why everybody loves having them. They're kind of the most easily tradable bond on the planet. And one of the reasons why the US government can fund itself so cheaply is because everybody loves buying them.