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Tax cuts pushed by President Trump are amplifying debt and deficit concerns among the powerful market players who influence interest rates.
May 21, 2025Updated 7:02 a.m. ET
For decades, budget hawks warned that America’s debt load was unsustainable and that runaway spending financed with borrowed money was eventually going to scare investors away from lending to the United States. Those fears are now taking hold more strongly in the bond market, and are at risk of spreading further.
Tax cuts pushed by the Trump administration are amplifying debt and deficit concerns among bond investors, a powerful group of market players who strongly influence how much it costs for the government to finance its budget. The buying and selling of government debt, known as Treasuries, also influences interest rates on a wide variety of debt extended to American households and businesses, including mortgages, credit cards and car loans.
Those investors were already on edge over President Trump’s whipsawing tariff policy. Then this week’s attempt to push through sweeping tax cuts without significantly slashing spending — in what the president has called a “big, beautiful bill” — set off a fresh bout of bond market turmoil. Mr. Trump put more pressure on Republicans lawmakers on Tuesday, visiting Capitol Hill and warning that failing to advance the bill would lead to higher taxes.
Since dropping below 4 percent in early April, the 10-year Treasury yield has risen back above 4.5 percent, a large move reflecting deficit worries. The moves for the 30-year yield this year have also been stark: It has jumped above 5 percent, its highest level in about a year and a half.
Speaking with reporters on Tuesday, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, warned that volatility in the Treasury market could add to already heightened uncertainty about the economic outlook.
