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Carney’s Checkmate: How Canada's Quiet Bond Play Forced Trump to Drop Tariffs
(deanblundell.substack.com)
this post was submitted on 11 Apr 2025
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I don't understand how prices drop and interest rates rise as a consequence of nations selling bonds. Wouldn't prices only matter to the buyers and sellers of the bonds? And why would interest rates change?
In any case, if it gets the world to trust the USA much less, as we sadly very much deserve, I'm all for that.
Bonds offer fixed interest.
Let's say a $50 bond offers $5 dollar yield at maturity (10%).
If those that currently own bonds sell en masse, the bond becomes less valuable (let's say $40) but the yield is still $5.
Now the interest rate is 5/40 = 12.5%.
The 30 year treasury bond interest rate is closely tied to mortgage rates.
A higher bond interest rate makes it more expensive for businesses to borrow money.
If other countries sell off US bonds (which are purchased in US dollars), they flood the market with US dollars which ultimately diminishes the dollars value.
Trump and his ilk like to act like the US subsidizes many of its allies when that is very clearly an oversimplification. Many of the US's allies own US debt (in the form of bonds) because the US is an extremely reliable borrower. If those countries decided the US is not reliable enough to lend money to anymore, it would be extremely problematic for the American economy.
Tl; Dr: Canada, Japan and the EU could twist American home buyers and businesses by the balls by selling off bonds and, if they took it far enough, even devalue the US dollar. America spends a shit ton of borrowed money from its allies and even China.
I read that as Dr Canada at first