Donald Trump has finally blinked – but it’s not the stock markets that have forced him to act
Chalk this one up to the bond vigilantes.
This is the term used periodically to describe investors who push back against what are perceived to be irresponsible fiscal or monetary policies by selling government bonds, in the process pushing up yields, or implied borrowing costs.
Most of the focus on markets in the wake of Donald Trump’s imposition of tariffs on the rest of the world has, in the last week, been about the calamitous stock market reaction.
This was previously something that was assumed to have been taken seriously by Mr Trump.
During his first term in the White House, the president took the strength of US equities – in particular the S&P 500 – as being a barometer of the success, or otherwise, of his administration.
Donald Trump in the Oval Office today. Pic: Reuters
He had, over the last week, brushed off the sour equity market reaction to his tariffs as being akin to “medicine” that had to be taken to rectify what he perceived as harmful trade imbalances around the world.
But, as ever, it is the bond markets that have forced Mr Trump to blink – and, make no mistake, blink is what he has done.
To begin with, following the imposition of his tariffs – which were justified by some cockamamie mathematics and a spurious equation complete with Greek characters – bond prices rose as equities sold off.
That was not unusual: big sell-offs in equities, such as those seen in 1987 and in 2008, tend to be accompanied by rallies in bonds.
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What it’s like on the New York stock exchange floor
However, this week has seen something altogether different, with equities continuing to crater and US government bonds following suit.
At the beginning of the week yields on 10-year US Treasury bonds, traditionally seen as the safest of safe haven investments, were at 4.00%.
By early yesterday, they had risen to 4.51%, a huge jump by the standards of most investors. This is important.
The 10-year yield helps determine the interest rate on a whole clutch of financial products important to ordinary Americans, including mortgages, car loans and credit card borrowing.
By pushing up the yield on such a security, the bond investors were doing their stuff. It is not over-egging things to say that this was something akin to what Liz Truss and Kwasi Kwarteng experienced when the latter unveiled his mini-budget in October 2022.
And, as with the aftermath to that event, the violent reaction in bonds was caused by forced selling.
Now part of the selling appears to have been down to investors concluding, probably rightly, that Mr Trump’s tariffs would inject a big dose of inflation into the US economy – and inflation is the enemy of all bond investors.
Part of it appears to be due to the fact the US Treasury had on Tuesday suffered the weakest demand in nearly 18 months for $58bn worth of three-year bonds that it was trying to sell.
But in this particular case, the selling appears to have been primarily due to investors, chiefly hedge funds, unwinding what are known as ‘basis trades’ – in simple terms a strategy used to profit from the difference between a bond priced at, say, $100 and a futures contract for that same bond priced at, say, $105.
In ordinary circumstances, a hedge fund might buy the bond at $100 and sell the futures contract at $105 and make a profit when the two prices converge, in what is normally a relatively risk-free trade.
So risk-free, in fact, that hedge funds will ‘leverage’ – or borrow heavily – themselves to maximise potential returns.
The sudden and violent fall in US Treasuries this week reflected the fact that hedge funds were having to close those trades by selling Treasuries.
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Trump freezes tariffs at 10% – except China
Confronted by a potential hike in borrowing costs for millions of American homeowners, consumers and businesses, the White House has decided to rein back its tariffs, rightly so.
It was immediately rewarded by a spectacular rally in equity markets – the Nasdaq enjoyed its second-best-ever day, and its best since 2001, while the S&P 500 enjoyed its third-best session since World War Two – and by a rally in US Treasuries.
The influential Wall Street investment bank Goldman Sachs immediately trimmed its forecast of the probability of a US recession this year from 65% to 45%.
Of course, Mr Trump will not admit he has blinked, claiming last night some investors had got “a little bit yippy, a little bit afraid”.
And it is perfectly possible that markets face more volatile days ahead: the spectre of Mr Trump’s tariffs being reinstated 90 days from now still looms and a full-blown trade war between the US and China is now raging.
But Mr Trump has blinked. The bond vigilantes have brought him to heel. This president, who by his aggressive use of emergency executive powers had appeared to be more powerful than any of his predecessors, will never seem quite so powerful again.
Hip hop mogul Sean “Diddy” Combs has lost a bid to delay his upcoming sex-trafficking trial by two months.
US district judge Arun Subramanian said the 55-year-old rapper made his request too close to his trial, which is due to start next month.
Jury selection is currently scheduled for 5 May with opening statements set to be heard seven days later.
Combs has pleaded not guilty to five criminal counts including racketeering and sex trafficking.
Prosecutors with the Manhattan US attorney’s office accuse Combs of using his business empire to sexually abuse women between 2004 and 2024.
Combs’s lawyers say the sexual activity described by prosecutors was consensual.
In a court filing on Wednesday, Combs’s lawyer Marc Agnifilo asked Mr Subramanian to delay the trial because he needed more time to prepare his defence to two new charges which were brought on 4 April.
The charges were of sex trafficking and transportation to engage in prostitution.
Mr Agnifilo also said his team needs extra time to review emails it wants an alleged victim to turn over.
The new allegations brought the total number of criminal charges against the rap mogul to five – following the three original counts, which also included racketeering conspiracy, filed in September.
Federal prosecutors were opposed to any delay, writing in a Thursday court filing that the additional charges brought
earlier this month did not amount to substantially new conduct.
They also said Combs was not entitled to the alleged victim’s communications.
Read more: Everything you need to know about the Sean Combs trial
A sketch of Combs during one of his court appearances. Pic: Reuters
Meanwhile, Mr Subramanian is weighing other evidentiary issues, such as whether to allow alleged victims to testify under pseudonyms.
Also known during his career as Puff Daddy and P Diddy, Combs founded Bad Boy Records and is credited with helping turn rappers and R&B singers such as Notorious B.I.G, Mary J. Blige, Faith Evans and Usher into stars in the 1990s and 2000s.
But prosecutors have said his success concealed a dark side.
They say his alleged abuse included having women take part in recorded sexual performances called “freak-offs” with male sex workers, who were sometimes transported across state lines.
Combs has been in jail in Brooklyn since September, having been denied bail.
He also faces dozens of civil lawsuits by women and men who have accused him of sexual abuse.
Combs has strenuously denied all allegations of wrongdoing.
About 10,000 pages of records related to the assassination of Robert F Kennedy (RFK) nearly 60 years ago have been released publicly for the first time.
The senator, who was the brother of US president John F Kennedy (JFK), was shot dead at the Ambassador Hotel in Los Angeles on 6 June 1968, moments after giving his victory speech for winning California’s Democratic presidential primary.
His assassin, Sirhan Sirhan, was convicted of first-degree murder and is serving life in prison.
RFK’s assassination, much like his brother’s in 1963, has been the subject of much speculation.
His son, Robert F Kennedy Jr, previously said he believed his father was killed by multiple gunmen, an assertion that contradicts official accounts.
After the documents were released on Friday, director of national intelligence Tulsi Gabbard said they would “shine a long-overdue light on the truth”.
Many files related to the senator’s assassination had already been released, but the ones posted to the US National Archives and Records Administration on Friday had not been digitised and sat for decades in storage facilities maintained by the federal government.
The move is a continuation of the release of historic withheld files ordered by US President Donald Trump, in an apparent bid to prove the transparency of his administration.
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Trump announcing release of JFK files in March
It started when he signed an executive order back in January for the release of thousands of files about JFK’s assassination, many of which were made public in March.
The files gave readers more details about the US’s covert operations during the Cold War-era, but did not lend legitimacy to any of the many conspiracy theories surrounding the former president’s death.
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RFK Jr, who is also Mr Trump’s health secretary, commended the president and Ms Gabbard for their “courage” and “dogged efforts” to release the files.
“Lifting the veil on the RFK papers is a necessary step toward restoring trust in American government,” he said in a statement.
In a statement, Ms Gabbard said: “Nearly 60 years after the tragic assassination of senator Robert F Kennedy, the American people will, for the first time, have the opportunity to review the federal government’s investigation thanks to the leadership of president Trump.”
Lawyers for RFK’s killer have been pushing for his release for decades, saying he is unlikely to reoffend or pose a danger to society.
A parole board deemed Sirhan suitable for release in 2022, but California governor Gavin Newsom rejected the decision in 2022, keeping him in state prison.
A different panel denied him release in 2023, saying he still lacked insight into what caused him to shoot RFK.
Donald Trump has said his second state visit to the UK could take place in September.
Prime Minister Sir Keir Starmer handed over an invitation from the King when he visited Washington in February.
Trump teases return to UK – latest updates
Buckingham Palace previously only said the visit would happen “when diaries allow”, but Mr Trump told reporters on Thursday: “I think they are setting a date for September.”
“I don’t know how it can be bigger than the last one,” he said.
“The last one was incredible, but they say the next one will be even more important.”
Sir Keir Starmer handed Trump the invite earlier this year. Pic: PA
Mr Trump will become the only elected political leader in modern times to be invited to two state visits by a British monarch.
The president called the UK a “great country” in his comments at the White House on Thursday and said it was “an honour to be a friend of King Charles and the family, William”.
His first state visit was in 2019, when he was hosted by the late Queen.
Second-term US presidents who have already made a state visit usually get tea or lunch with the monarch at Windsor Castle, as was the case for George W Bush and Barack Obama.
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The president was hosted by the Queen in June 2019. Pic: Reuters
But Mr Trump is set to get all the pomp and ceremony laid on again in his honour – with another state banquet likely at Buckingham Palace.
The Royal Family‘s soft power diplomacy is viewed as a way of currying favour with the president, who’s known for his love of the monarchy and links to the UK through his mother, who was born on the Isle of Lewis in Scotland.
It comes as the government seeks an economic deal with the US, in the hope of potentially lessening the impact of the president’s tariffs.
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