Donald Trump’s presidency may be the most unknown commodity to hit markets since ancient alchemists started hawking something called 'bronze' to befuddled cavemen, but his stone-age political manoeuvring has smoothed the future path of public sector borrowing.
After falling at the first hurdle to get a signature policy of his campaign — healthcare reform — through Congress, more than a few investors are now wondering whether he’ll be able to enact his tax cuts and infrastructure spending. That opinion gained more weight as he launched into his familiar tirade medium of Twitter to attack the ultra-conservative Republicans in Congress who were among the opposition to the healthcare bill.
US Treasury yields have fallen from their 2017 highs as investors re-evaluated the Trump-inspired reflation trade — and perhaps paid closer scrutiny to the brewing storm of the alleged collusion between Russian authorities and the Trump campaign team.
Those falling rates created the perfect conditions for Sweden to bring a three year dollar benchmark this week (see story on page 3), helping it glide towards the tightest spread to mid-swaps on an SSA dollar deal this year.
Of course, Trump’s unpredictability means that more chaotic and dangerous times could lie ahead — not boding well for other markets such as equities and corporates.
But for the super-safe world of SSAs, a disintegrating Trump presidency might just prove to be a blessing in disguise.
And what better example of a triple-A, safe haven asset to showcase that trend this week than Sweden — unless one is concerned about all of the made-up terrorist attacks that Trump has imagined the country is suffering.