{"text":[[{"start":17.14,"text":"President Donald Trump’s “hottest economy in the world” is fuelling a huge sell-off in the world’s biggest bond market, as strong growth and inflationary pressures turbocharge US interest rate expectations."}],[{"start":27.151,"text":"The $32tn US Treasury market this week suffered its biggest one-day rout since the start of the president’s trade war and is on track for its worst month since late 2024, as unexpectedly robust economic data adds to pressures from record debt and surging oil prices."}],[{"start":44.039,"text":"Ten-year US Treasury yields, the foundation stone for borrowing costs across the global economy, tore above 5.2 per cent this week to their highest level since 2007 as the price of the debt tumbled. Thirty-year yields rose above 5.5 per cent for the first time since 2004."}],[{"start":61.98,"text":"Big bond investors said the surge in yields reflects a market struggling to keep up with powerful US economic growth, as rising borrowing costs so far show no sign of putting a brake on activity."}],[{"start":72.82,"text":"“There’s been a lot of debate about whether Treasury yields have got to levels that start to . . . cool a red-hot economy,” said Mike Riddell, a fund manager at Fidelity International. “Economic data have answered that — we’re not even close.”"}],[{"start":null,"text":"
"}],[{"start":86.94,"text":"A mixture of domestic economic resilience and high energy prices stoked by the Iran war prompted the Federal Reserve to raise interest rates this month for the first time since 2023."}],[{"start":98.54,"text":"The central bank’s hawkish tone and robust data on economic activity and consumer price growth in recent weeks have prompted investors to escalate bets on more rate rises over the next year."}],[{"start":109.56,"text":"This was compounded by S&P Global’s Purchasing Managers’ Index on Wednesday, which surprised Wall Street by showing business activity in September accelerating at the fastest pace in five years."}],[{"start":120.78,"text":"The report reinforced a view that the world’s biggest economy continues to run hot, driven by a booming stock market and huge investment in AI. The Atlanta Fed’s GDPNow tracker forecasts that the economy will grow at an annualised rate of 5.1 per cent in the third quarter."}],[{"start":null,"text":""}],[{"start":137.42,"text":"“This is the “HOTTEST” Economy in the World — and the Media is working overtime for the Democrats to convince Voters that the opposite is true,” Trump posted on social media on Thursday."}],[{"start":148.9,"text":"He added that the economic outlook was good for working people “because it gives them more wage leverage”."}],[{"start":155.1,"text":"However, the broader challenge facing households was underlined by the 30-year mortgage rate hitting 7 per cent this week for the first time in almost two years, intensifying affordability pressures."}],[{"start":168.02,"text":"After this month’s quarter-point move and amid a pile-up of evidence of US economic strength, the futures market is pricing in another 0.9 percentage points’ worth of increases by this time next year, from the current range of 3.75 to 4 per cent."}],[{"start":183.34,"text":"At the start of September, before the Fed meeting, only about 0.6 percentage points were expected over that period, including the central bank’s anticipated rate rise."}],[{"start":193.58,"text":"The dollar has climbed on the higher interest rate outlook, rising around 1.5 per cent this month against its major peers."}],[{"start":200.9,"text":"While much attention has focused on the surge in long-term interest rates, short-term yields have risen even more in recent weeks."}],[{"start":207.3,"text":"“The market is revising the Fed rate path to be higher for longer,” said Seb Barker, chief market strategist at hedge fund firm Marshall Wace. “For all the drama around the long end, the [yield] curve has flattened year to date. What has changed is the pricing for the Fed.”"}],[{"start":223.58,"text":"Fading hopes for an end to the US-Iran war imply that “good” inflation from economic growth, which is driven by demand, will be coupled for longer with “bad” inflation from costs such as rising energy prices, analysts said."}],[{"start":237.02,"text":"Both are pushing bond investors to demand higher yields at a time when the net US debt pile has topped $40tn."}],[{"start":243.74,"text":"“The Iran war has flipped the inflation dynamic, turning an easing cycle into a hiking cycle,” said Trevor Greetham, head of multi-asset investing at Royal London Asset Management. “Activity is also strong . . . and fiscal policy isn’t exactly fixing the roof while the sun is shining.”"}],[{"start":260.42,"text":"Fed officials including Michael Barr, Neel Kashkari and Susan Collins have made hawkish statements in recent days, indicating that further rate rises may be needed to bring inflation under control."}],[{"start":271.34,"text":"The central bank’s preferred measure of inflation, the personal consumption expenditures index, rose at an annual rate of 3.7 per cent in July and has been above the Fed’s 2 per cent target since 2021."}],[{"start":284.82,"text":"This has left investors wondering at what point the bond market sell-off — which has already blown through the danger level of 5 per cent 10-year yields that some investors were warning about — can meaningfully weigh on the economy or shatter the stock market’s calm."}],[{"start":299.603,"text":"The US economy has so far been “relatively insensitive” to rate rises, said Robert Tipp, head of global bonds at PGIM Credit. “There’s something going on that’s different, in terms of this being a pretty asset-rich and cash-rich expansion, where the higher rates are not the threat that we’re used to seeing.”"}],[{"start":316.18,"text":"Data visualisation by Ray Douglas"}],[{"start":323.82,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790389288_6028.mp3"}