Everyone in finance has their own theory about the Trump mayhem. At lunch with a senior insurance executive, I was assured there was method in the madness.
The US’s budget deficit, at $33.6 trillion and heading for 156 per cent of GDP, is unsustainable.
The President’s tariff threat is designed to ramp up revenues in super-quick time while Doge, the Department of Government Efficiency, is taking a meat-axe to spending.
Never mind that the pernicious trade war is backfiring and the architect of Doge, Elon Musk, will soon be out.
Another view is that Trump and his billionaire comrades calculate that the scorched earth policy would flatten the economy, cause a deep recession, but pave the way for a magnificent recovery just in time for the Congressional elections in November 2026.
As credible as all that may seem, it is an enormous gamble. The President has set off a chain reaction which he can’t control and will impact all our lives.
Shock tactics: US President Donald Trump has by accident has triggered a surge in US bond markets with the ten year at its highest level in seven weeks
No one in Britain can have any illusions about the importance of bond markets.
The Liz Truss episode, in 2023, is engrained on the national memory when a surge in bond rates almost scuttled the pensions system. Current Chancellor Rachel Reeves won’t let the memory die.
Trump, by accident, has triggered something similar in the US bond markets. US yields soared in Wednesday trading sending the ten-year to its highest level in seven weeks. Thirty-year American treasuries climbed by one-fifth of a percentage point to 4.923 per cent.
The rise over the last three days is the biggest since 1982.
Hedge funds have been doing some dumping. But it is possible China has seen a possibility of heaping financial pressure on the US by offloading reserves. The rise in bond yields in the US dragged borrowing costs across the globe higher.
For the UK, the 30-year gilt is now yielding 5.53 per cent, which is not helpful if the fiscal rules are to be met.
As much as the Office for Budget Responsibility might be disparaged on the political right, Keir Starmer may have inadvertently made things worse by criticising it before MPs.
Bond guru Mohamed El-Erian, formerly of Pimco, will not have endeared himself to the Government. He asserts that the rise in bond yields will mean Reeves may be left with no choices but to raise income taxes or VAT to curb borrowing. Yikes!
Medical error
Now that Ed Smith’s former employer NHS England has been abolished, the non-executive chairman of GP surgery owner Assura has thrown in the towel.
Faced with the prospect of having to carry on, amid market turmoil, or accepting a £1.6billion deal from private equity barons KKR and Stonepeak Partners, it wants the cash.
Under normal circumstances the 32 per cent premium might be seen as mean, given the historic discount of UK shares to the US.
But, one supposes, in current circumstances it looks a better option than staying independent or accepting a lower offer from rival Primary Health Properties.
All the emphasis from Assura is that the deal must be good for the UK because the offer comes from KKR’s long-term infrastructure fund and will ensure there is adequate capital for future investment.
The fund is already invested in Viridor, which generates energy from waste as well as smart meters.
Everyone should be cautious about private equity involvement in health and social service assets.
The model of piling on debt and stripping out costs is never ideal as the exploitative Blackstone experiment at Southern Cross showed. It might be asked what harm KKR can do with a medical estate?
It could seek to improve yields by increasing rents for a start. Not a great prospect for an NHS capsizing under pressure.
Thrills and spills
A BIT of cheer for creative Britain you may have missed: Sky owner Comcast plans to open Universal’s first European theme park near Bedford.
The aim is to attract 8.5m visitors a year and create 8,000 jobs. Sir Keir Starmer and Rachel Reeves proclaimed it a triumph for their growth agenda. Sure!
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .