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| one of my Nephews works with a larger type bond trading firm. he gave me his and his firms view on yesterdays action in the bond market.
this view is arrived by combining actions in the bond market, meeting among players, and some personal opinions on the reactions of the markets and the fallout of those reactions.
to start with some background, over the last 5 days China had reached out to Japan, Canada, United Kingdom, European Union, Luxemburg, Hong Kong, Brazil, and India for discussion on the US Tariffs. The exact extent of these talks can not be know with 100% certainty but the belief based on actions is that these talks revolved around the use of the bond market to flex their collective muscle. It was said that China stated they wanted to sell a large chunk of their treasury bonds back into the market and help push up interest rates hoping to get the US to make some changes to their demands the trade war. Once the terms of what trump was demanding out of Vietnam became known, the big players got much more interested in this reaction plan.
here is how it played out
Vietnam went first to the US to seek a deal they offered to drop all tariffs on both sides to 0% , Trump and his administration said NO you will have to give us more, when that news hit the market Japan called the big four players and said they were in under one condition that they got to be the first to talk to trump and the first to start selling their bonds back into the market. China agreed, the UK stated that they would give Japan 1 hour lead time and then they got to start selling their bonds, it was then agreed to by China that after ONE hour everybody else got a couple hours to sell while China waited until those two hours were up before they proceeded to sell bonds.
The plan work much better than thought, Japan was involved with the US in negotiations, as they were talking Japan started selling bonds back into the market and the market started to move higher and pretty soon the 10year and 30year spiked higher and it is believed at that time treasury sectary Bessent pulled trump aside and let him know that the bond market was entering a very dangers area and they needed to change directions immediately, trump the excused himself turned the meeting with Japan over to some subordinates and ran to announce that tariffs were going to be paused for 90 days.
A few things that surprised the china coalition players was how soon the bond market collapsed and how little selling it took, it is thought that Japan was the only country to sell and it took less that 75 billion in selling to collapse it. ( for reference Japan hold 1.1billion in US bonds )
So where does it leave US at this point
1 ) 90 day pause on the majority of tariffs and a quite process as all tariffs ( outside of China ) including the reciprocal 10% tariffs are gone.
2) China now has the roadmap to pushback on trump ( and there is nobody that thinks they will not use it).
3) China has become a hero of sorts to the rest of the world at best, and a friend to all at least.
4) US is now fully viewed as a bully at best and a enemy to many in the world at worst
5) The fallout from this major economic gamble is not done (IMHO) and will be with us well into the midterm election cycle.
6) at this point trump is officially a lame duck and will see his credibility gone from the great majority.
7) The USA needs to put getting the deficit and national debt front and center of our priorities and that is going to involve pain all around and for everybody any plan that fails to do that is worthless and the leadership that understands that will be leadership that can be expected to be removed from office by the voting public, then the next round of leadership shall also understand that they will most likely be removed from office also.
are we willing to pay that price I have my doubts
again I can not stress this enough China has the playbook we are on defense at this point
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A bond traders view on what happened April 9th
