The Wall Street Journal’s conservative editorial board warned that rising bond yields carry a message that President Donald Trump ignores at his peril.
In a Tuesday editorial, the paper’s editors argued that climbing yields on long-dated government debt are not a catastrophe but a long-overdue return to normal, while cautioning that the picture could darken fast if Washington refuses to change course.
The board pointed to a global selloff that pushed the 10-year Treasury note to 4.8 percent on Tuesday and drove the 30-year U.S. bond to 5.28 percent. It also lifted Britain’s 30-year government bond to its highest level in nearly three decades. Japan’s 10-year yield touched a peak unseen in 30 years, The Journal noted.
Rather than sound an alarm, The Journal celebrated the shift as investors waking from almost two decades of what it called “financial repression,” an era of central-bank bond buying and rock-bottom rates that let “spendthrift” governments borrow cheaply and pile on debt.
But The Journal conceded the transition carries danger as “some market crack-ups are sure to occur, though who knows where and when.” The Trump administration could stave off a reckoning with policies that spur growth, “which doesn’t include tax increases or tariffs,” according to The Journal.
The Journal also noted that federal debt held by the public now equals 100 percent of GDP and annual interest payments have topped $1 trillion, which exceeds the entire defense budget. Neither party will touch the spending on programs like Social Security and Medicare, which is driving the climb, according to The Journal.
“The bond vigilantes aren’t yet in full cry, but their early murmurs are welcome,” The Journal wrote. “They are sending a message to Washington and other Western nations to clean up their fiscal acts.”
However, “the real worry is if the politicians don’t listen,” The Journal warned.
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