Trump Administration Struggles to Stabilize $30 Trillion Bond Market

The administration of Donald Trump is managing a fragile stability in the $30 trillion U.S. bond market following a collapse in April 2025 triggered by "Liberation Day" tariffs. To prevent further spikes in yields, Treasury Secretary Scott Bessent has expanded a buyback program for long-dated debt and shifted the government's borrowing strategy toward short-term Treasury bills to fund the federal deficit.

Bessent has focused on public communication and proactive consultation with investors regarding Federal Reserve chair candidates to keep borrowing costs low. Despite these efforts, investor anxiety persists due to a federal deficit at approximately 6 percent of GDP and total government debt exceeding 120 percent of economic output. This volatility resurfaced on November 5, when 10-year yields spiked over 6 basis points following signals of increased long-term debt sales and Supreme Court hearings on the legality of the administration's tariffs.

White House spokesman Kush Desai defended the administration, claiming that efforts to reduce government waste and fight inflation have strengthened confidence in U.S. finances. However, internal friction exists, as Stephen Miran, head of the White House Council of Economic Advisers, has criticized the heavy reliance on T-bills to fund the deficit. Analysts warn that the current equilibrium remains vulnerable to inflation surges, a hawkish Federal Reserve, or a potential AI market bubble burst.