{"text":[[{"start":7.6,"text":"James Carville, a political adviser to Bill Clinton, famously ranked the bond market above being president, the pope, or a baseball player on his list of things he would want to be reborn as. “You can intimidate everybody” he argued in 1993. Fixed income investors continue to be demanding stakeholders over three decades on. But although spendthrift governments are wary, they are not taking recent warnings from their creditors seriously enough."}],[{"start":43.54,"text":"Early last week global bond markets sold off sharply before paring losses amid Friday’s weak US non-farm payrolls data. There were multiple triggers for the initial jump in yields. A US appeals court ruling on August 29 that said many of President Donald Trump’s tariffs were illegal put hundreds of billions of dollars of potential government revenue in jeopardy. That led lenders to demand a higher yield for holding long-term US Treasuries, which acts as a marker for global borrowing costs. The post-summer return of government debt auctions added to the turbulence."}],[{"start":85.47,"text":"What are bond markets telling us? Last week’s ructions are just the latest example of investors becoming increasingly skittish about government borrowing. Gross debt as a share of GDP across OECD nations has risen from just over 70 per cent in 2007 to around 110 per cent in 2023. This has been driven by responses to the global financial crisis, the Covid-19 pandemic and the energy price surge that plagued Europe in the aftermath of Russia’s full-scale invasion of Ukraine. As debt piles have risen, so have long-term government borrowing costs, making debt markets vulnerable to episodic sell-offs like last week’s. All that’s needed is a spark."}],[{"start":134.71,"text":"Regardless of where interest rates and inflation head in the near-term, the volatility will ease only if countries get spending under control. This year, 10 and 30-year yields on many advanced economies’ public debt have faced upward pressure. This, in part, reflects investors’ sinking faith in the ability of leaders to consolidate public finances. Higher demands for public spending — including from defence and ageing demographics — have converged with rising expectations, and a greater readiness, to provide state support, following recent crises."}],[{"start":172.14000000000001,"text":"Following a backlash in June, Britain’s Labour government was forced to reverse around £6bn in planned welfare spending cuts despite its large parliamentary majority. France’s unstable coalition government has struggled to agree on how to cut expenditure, given the inevitable pains on the public. The result has been budgetary deadlock. In Japan, where debts are over twice the size of its GDP, traders are speculating that political instability may usher in less frugal leadership."}],[{"start":210.23000000000002,"text":"As governments have struggled to make cutbacks they have lent on revenue-raising options. However, in the UK, gilt holders are growing concerned that further tax rises targeting the wealthy, investors or business will sap economic growth and worsen the country’s debt trajectory. In the US, Trump’s tax-cutting “big beautiful bill” was offset mainly by now uncertain revenues from tariffs which are set to dampen economic activity and America’s broader tax take."}],[{"start":248.97000000000003,"text":"The pressure is growing on leaders to find credible fiscal fixes. A combination of easing bond demand and rising supply will retain upward pressure on yields. Central banks around the world are reducing their balance sheets. Germany’s fiscal loosening will release more Bunds into the market. In the UK, pension schemes are buying fewer government bonds. Trump’s mercurial policymaking style, including his assault on the US Federal Reserve, will keep the benchmark Treasury market volatile."}],[{"start":283.5,"text":"With fiscal plans adrift and political turbulence, the bond markets’ patient goading will soon wear thin. Leaders may prefer to delay hard choices, but if they cannot muster the willpower to rein in spending, markets will impose it for them — swiftly, decisively and on terms no government would willingly choose."}],[{"start":312.84,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1757296664_1632.mp3"}