Trump’s America and Wall Street are in a dangerous spiral

October 14, 2026 — 12:00pm

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What would it look like if demand for government and corporate debt rose rapidly even as its cost surged? We’re seeing that play out in real time.

The coincidence of record levels of government debt and government debt issuance with the biggest investment boom in history is having an increasingly visible impact on debt markets, one exacerbated by stubbornly-high inflation rates and heightened geopolitical risks.

The world’s biggest debt markets are in the US, where there’s the $US32 trillion ($46 trillion) Treasuries market for government debt, a $US12 trillion-plus market for corporate debt and another $US2 trillion or so market for private credit.

The spreads between the yields on US government and investment grade corporate debt have risen slightly recently, but remain relatively tight. Those on lesser-rated debt have been blowing out, with CCC and even lower rated bonds trading at double-digit percentage point margins over Treasuries.

That’s happening in an environment where the yields on government debt have been rising so, for all but the higher-rated issuers, there’s the double-whammy of increased spreads against rising benchmarks.

The world’s richest person is testing Wall Street’s limits

The yields on the US and global benchmark bonds – US 10-year Treasuries – were at their lowest point for the year in late February, just before the US and Israel attacked Iran.

From 3.94 per cent then the yield has climbed to 4.82 per cent. The move in the yields on two-year bonds has been even more pronounced, from 3.38 per cent on the eve of the war to 4.82 per cent now.

The war, inflation and the expectation that the Federal Reserve........

© The Age