Economist warns Trump’s fiscal mix fuels bond market turmoil and rising yields

Johns Hopkins economist Steve Hanke says President Trump’s policies have created a “deadly cocktail” that is driving a sharp sell-off in Treasury bonds, pushing yields past the level Treasury Secretary Scott Bessent has tried to protect.

Steve Hanke, a professor of applied economics at Johns Hopkins and a senior one outlet columnist, warned that President Trump’s fiscal and monetary stance has produced a “deadly cocktail” for Treasury securities, triggering a bond sell-off that has already pushed yields beyond the informal ceiling Treasury Secretary Scott Bessent seeks to maintain. He identified three drivers, led by rapid money-supply growth measured by Divisia M4, which is expanding at 6.7% year-over-year, above his “Golden Growth Rate.”

Hanke argued that rising inflation expectations are now the primary force lifting yields, and he predicts the 10-year rate could climb another 50 basis points. The recent joint U.S.-Japan yen-buying intervention on July 31, aimed at averting a Japanese Treasury sell-off, underscores the pressure on yields. Hanke also contended that the bond market is the only asset class currently pricing risk correctly, while equities appear “sleepwalking” amid AI-driven hype and oil inventories are tightening, setting up a potential price rebound. He dismissed the notion of a U.S. “quiet default,” emphasizing the dollar’s entrenched reserve-currency role, and warned that continued rise in long-term rates could deflate the stock market bubble even without further Fed tightening.