Westpac has cautioned that President Trump's trillion-dollar spending proposal could keep bond investors on edge, even as Treasury Secretary Bessent tries to issue warnings to them.

"For decades, the foundational collateral asset of global financial markets is now being toyed with as if it were a plaything," said Martin Whetton, the bank's head of financial markets strategy. "Calling it a system collapse might be overstating it, but witnessing the Treasury Secretary scold bond investors and attempt to intervene directly in markets, only for his superior to impulsively add another $1.3 trillion in debt, is beyond what any rational investor could have imagined."

With oil prices hovering at multi-month highs and the Federal Reserve stepping up long-dated bond repurchases, the 30-year Treasury yield has still climbed sharply. "Because there are no takers for the bonds, dollar spreads have narrowed dramatically," Whetton noted. "Due to shifts in regulatory policy, those price-insensitive buyers have already left the market, and they are not coming back."

A more significant question looms over what this means for dollar asset allocation—whether hedging ratios will spike quickly to protect retirement savings. "Given the political and economic behavior the United States is displaying to the world, can it still find buyers to absorb its debt? The crack that began in the Rose Garden in April 2025, drawn open by a stroke of a pen, has now morphed from a latent risk into a tangible shock."