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To attract buyers for the bonds that will finance that deficit, the federal government will have to pay higher interest rates.
Historically, bond investors more or less swallow the debt the U.S. government takes on, but this time they may be less inclined to do so.
It makes sense for multinationals that do business in the Eurozone.
Borrowing isn’t cheap right now, especially for riskier businesses.
A government debt sale this week went poorly because potential buyers were spooked by tariffs.
In an uncertain environment, companies are less eager to take on debt and investors are charging more to lend.
High tariffs could spur inflation and hold back employment, pulling the Federal Reserve in different directions on interest rates.
Buying a bond is usually like going for ice cream (to a regular ice cream place): You pick your flavor, you pay, you enjoy a nice, predictable payoff. Lately though, that’s not the deal.
The new administration hopes that energy dominance and government efficiency can bring down borrowing rates.
Higher yields compensate for the higher risk of investing for 10 or 30 years, when it’s hard to predict how that future economy might look.
