Treasury Yields Surge as Markets Wrestle with Trump’s Economic Agenda

The unusual rise in Treasury yields is sparking debate among economic experts, with Paul Krugman proposing an “insanity premium” linked to Trump’s policy pronouncements. The incoming administration’s agenda of high tariffs, tax cuts, and mass deportations has economists nearly unanimous in predicting inflationary pressures, potentially forcing the Fed to pause or reverse rate cuts. This uncertainty is reflected in December’s Fed minutes, where officials noted increased inflation risks partly due to potential policy changes. Meanwhile, the market response has been mixed – while yields have climbed significantly since September, some analysts like Nationwide’s Mark Hackett suggest the market reaction might be more about finding reasons to sell after strong gains rather than fundamental concerns about policy. The situation highlights the complex interplay between political uncertainty, monetary policy, and market psychology.