Bond market starts to doubt Trump’s plans

A big bet investors made on President Donald Trump’s plans seems to be crumbling away.

As President Trump’s defeat on health care reform stokes doubts about his plans to boost the economy with infrastructure spending and a tax overhaul, investors have been pulling out of the stock market and moving back into relatively safe assets.

Bond prices had plunged in the months after the election, sending yields higher, as investors anticipated that Trump’s agenda could send inflation higher, something bond investors hate.

Now, those yields are falling again, a sign that bond investors could be less worried about the inflation that higher growth could bring. The yield on the benchmark

10-year Treasury note has dropped to 2.35 percent, near its low for the year and well below the 2.62 percent it traded at in mid-March. Despite strong jobs reports in

February and March, now investors seem more convinced that President

Trump’s big economy-boosting ideas like infrastructure spending may not find enough support in Congress, similar to what happened with the failed health care bill.

A $1 trillion infrastructure package could increase the risk of higher inflation in the U.S., which would lead bond investors to demand higher yields on bonds to compensate. With investors now seeing lower risk of inflation, they’re willing to accept lower yields on the bonds they buy.