The US President's promise to distribute cash payments nationwide if Republicans win the midterm elections is injecting fresh uncertainty into the Treasury market just ahead of a 30-year bond auction, reigniting concerns about Washington's fiscal discipline and policy unpredictability.
Donald Trump has pledged to hand a $5,000 dividend to all adult American citizens should the Republican Party retain control of both chambers of Congress. No specifics of the plan were provided, and the proposal is unlikely to become law.
Trump's comments come as 30-year Treasury yields hover near their highest levels since the global financial crisis, following a US government plan to buy back up to $60 billion in long-dated bonds—a figure that fell short of some investor expectations. Market attention now centers on Thursday's auction of $22 billion in 2056-dated US Treasuries, as well as a key inflation reading due later this week.
Speaking of Treasury Secretary Scott Bessent, Kiyoshi Ishigaki, chief fund manager at Mitsubishi UFJ Asset Management in Tokyo, remarked: "Bessent is working hard to push yields down, and Trump's comments run counter to that." He added: "I'm not saying this one statement alone will trigger a massive sell-off in Treasuries, but it raises the question: what exactly is the Trump administration trying to achieve as a whole? Remarks like this make it hard to gauge."
In recent weeks, mounting tensions in the Middle East have pushed oil prices higher, fueling bets that the Federal Reserve may need to hike rates again, which has weighed on the Treasury market. At the same time, persistent worries about the fiscal health of the world's largest economy—with total US public debt surpassing $40 trillion for the first time—have further pressured government bonds.
Yew Mun Lee, senior rates strategist at DBS Bank, noted: "This policy makes the midterm election outcome a much more binary event for investors assessing US Treasuries. Should the Republicans succeed in taking both chambers, concerns over fiscal issues could balloon rapidly."