With US debt about the breach $40 trillion, Scotty Bessent intervened to stem rising long-end yields. The market loved it, but the reality is that distorting interest rates has all kinds of consequences. That includes the risk an economy focused entirely on financial returns isn’t spotting or addressing real world threats to jobs, growth, conflict, the environment and climate. Maybe it’s time to let rates normalise?

In the past 15 years the US economy has left Europe in the rear-view mirror. While America booms, Europe appears to be flatlining. The question is why? Americans say it’s entirely Europe’s fault: bad policies, failing politics, and lack of unity. However, the consequences of the (as yet unresolved) European Sovereign debt crisis triggered by the Global Financial Crisis of 2008 was the speedbump.

Stock Markets partied higher yesterday, utterly unbothered by the optics of the Iran Deal. Bond markets look at the long-term risks – wondering what the consequences of the Iran war might trigger in the coming years when today’s new bonds are set to repay. Traders will be trying to figure out what a new world will look like, and just how sustainable US Bonds markets might be as the global economy shifts.

Western economies succeed because bond and stock markets work together. Bond markets enable governments to finance the optimal conditions for invention and innovation, enabling growth and prosperity. Sometimes Markets fall out of line, while Politics are ruled by votes rather than experience – and that’s where the wobbles start to multiply.

The UK is not about to disappear in a puff of smoke because the Gilts Market is having a minor tantrum. But there is a serious Political Competency premium on Gilts, which will rise when the scale of Labour’s defeat becomes apparent, and the Starmer premiership is up against the wall. Trouble ahead.

The spike in Gilt Yields says it all. Its crisis – again – in Westminster as Starmer is mired in crisis with no obvious way out. Yet again we learn a political lesson – good  political leaders are a scarce commodity. The British electorate is losing faith in politics. What will global investors think?

Damn the torpedoes! Full steam ahead. The recent 10-year Gilt auction was a screaming success. There is plenty of demand at the right yield – 5% for 10 years! The cost of servicing debt is high, but to create growth the government needs to fix the economy by borrowing more. Global investors know that when assessing the UK’s yield premium. The UK would do better to borrow more rather than less!

The cost of Trump’s War on Iran is extraordinary - $1 bln a day plus. War Stocks are being consumed at incredible speed. A request for an additional $200 bln of funding is in the works. The nature of war has changed – it could prove phenomenally destructive, expensive and ruinous to winners and losers alike. Meanwhile the economic outcomes of the war remain in the balance.

Does the steepness of the US yield curve tell us the US Economy is about to boom, or inflation is about to sink the Treasury markets? To figure out which, you need to interrogate the witnesses and look at what the evidence is telling us.

The Russians have captured the FT, apparently! The headline that Gilts are about to crash because the Government will borrow more to increase defence spending is Pravda 101. The reality is Gilts should rally on increasing the strategic deterrence that defence spending will create.