It's the Bond Market in Need of Convincing as Trump Blasts the Fed to Lower Rates

President Donald Trump’s push for cheaper borrowing costs collided with a wary bond market on Friday, just as two cornerstone policies—his tariff strategy and sweeping tax cuts—approach critical deadlines.
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The president had already attacked Federal Reserve Chair Jerome Powell earlier in the shortened week, declaring on social media that keeping rates unchanged was “costing our country hundreds of billions of dollars.”
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Trump escalated, calling Powell “one of the dumbest, and most destructive, people in government,” while adding that the Fed’s entire board was complicit.
Yet convincing the bond market—not simply the Fed—remains essential if the White House truly wants lower financing costs.

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The central bank controls very short‑term benchmarks, but market forces dictate ten‑ and thirty‑year Treasury yields that underlie mortgages, corporate loans, and other credit.
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Those longer rates have refused to follow September’s modest Fed easing; instead they climbed after November’s “red wave” returned Congress to Republican hands, signaling persistent unease over fiscal policy.

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That tension comes as lawmakers race to pass the One Big Beautiful Bill Act, a sweeping tax‑and‑spending package that would extend Trump‑era tax cuts while trimming up to $1 trillion from Medicaid over ten years.
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Republican leaders hope to send the bill to the president by July 4, only days before a temporary pause on “liberation day” tariffs expires—though that deadline might be pushed back to allow more talks.

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“Interesting that they’re eager for cuts,” said Mike Sanders, head of fixed income at Madison Investments. He warned that even if the Fed obliged, mortgage rates and business borrowing costs might not fall in tandem.

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Bond investors remain fixated on ballooning federal deficits. A fresh Congressional Budget Office score projects the new tax bill will widen the deficit by roughly $2.8 trillion through 2034, exceeding an earlier May estimate.

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Sanders noted that while the Fed steers the short end of the curve, inflation expectations and term premiums drive the long end—both likely to rise if tariffs add to prices or the Fed front‑loads rate cuts this year instead of spacing them out.

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Such worries leave portfolio managers reluctant to extend duration, even at today’s elevated yields.
Danny Zaid, portfolio manager at TwentyFour Asset Management, expects the next two to four months will reveal how inflationary the tariff regime proves to be.
Until then he favors the “cleaner, less uncertain” backdrop in European bonds and credit, where fiscal debates seem less combustible.

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Complicating matters, Fed Governor Christopher Waller declared Friday that he supports lowering the policy rate—currently 4.25%‑4.5%—as soon as the July 29‑30 meeting.
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“We’ve got room to bring it down,” he told CNBC, though he added officials could halt cuts if inflation reignites. Asked about Trump’s online tirades, Waller replied that Congress tasks the Fed with full employment and price stability, “not cheap financing for the U.S. government.”

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He argued it is Congress and the Treasury’s responsibility to craft a sustainable fiscal path that reduces deficits and thereby eases borrowing costs.

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Despite Waller’s dovish tone, ten‑ and thirty‑year Treasury yields closed virtually flat at 4.374% and 4.889%, respectively—below last year’s near‑5% peaks yet far above twelve‑month lows.
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Cindy Beaulieu, chief investment officer at Conning North America, forecasts the ten‑year will trade between 4% and 5% through December, with any sharp labor‑market weakness posing a risk of yield spikes within that range.

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“At present we have more confidence in the upper end of that band than the lower,” she told MarketWatch, though a clear economic slowdown could test the bottom. Market veterans warn that aggressive, pre‑emptive Fed easing could unsettle bond buyers rather than reassure them, driving yields even higher—precisely what the administration hopes to avoid.
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Until Washington produces credible plans to rein in deficits and clarifies trade policy, Treasury investors seem content to keep their guard up, no matter how loudly the president demands cheaper money or how intensely policymakers debate patience versus action.

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