Crypto News: “Bond vigilantes” have eyes on Election Day

The size of the US debt hasn't been a big issue in the presidential campaign, but it might make a comeback once a new president is in office. Carter Johnson writes today about what the markets are signaling. Plus: If you haven't looked at new-car prices recently, you might be in for a surprise. And in Dalton, Georgia, the carpet industry relies increasingly on Latinos, migrants and their children. If this email was forwarded to you, click here to sign up.

The term "bond vigilantes" is poised to reenter the lexicon of the Oval Office, no matter who wins the US presidential election.

The term, coined by bond veteran Ed Yardeni in the 1980s, describes investors who succeeded in forcing governments and central banks into policy U-turns by pushing the price of bonds down and their yields up. Markets of late have been remarkably impervious to such hawkish investors—the bond vigilantes—bent on punishing the federal government for what they see as fiscal excess. That could be changing, with neither Vice President Kamala Harris nor former President Donald Trump focused on dealing with America's mountain of debt, Yardeni said in a Bloomberg Television interview last week as he raised the prospect of the vigilantes' return.

Fixed income's terrible performance in October lends credence to this notion. A Bloomberg gauge of US government bonds saw its worst month in two years, while the yield on benchmark 10-year Treasuries rose some 50 basis points. The market's plunge is most fundamentally linked to the US economy's strength causing investors to scale back expectations that the Federal Reserve will aggressively reduce interest rates this year.

But—but—it's also tied to the prevalence of the so-called Trump trade.

Investors see more risk of higher deficits and reinflation to follow with a second Trump presidency, due to his economic policies centered on widespread tax cuts and tariffs. The key consideration with a Trump victory is whether Republicans capture control of the House and Senate, which would allow him to follow through on a lot of that fiscal agenda, says Noel Dixon, a macro strategist at State Street Corp. "That's just uncharted territory," Dixon says. The yield on 10-year Treasuries could push beyond 5% in this case, according to Dixon, from about 4.3%.

On Monday, traders pulled back on that view and sent the dollar and bond yields tumbling as they reassessed Trump's path to the White House, principally because a Des Moines Register/Mediacom Iowa poll revealed Harris has a three-point lead over Trump in the state. Still, the latest polling signals the candidates remain poised for an exceedingly close finish to the campaign.

Rachel Reeves, UK chancellor of the exchequer, outside 11 Downing Street on Wednesday. Photographer: Hollie Adams/Bloomberg

The next president can look to the UK for a cautionary tale on the market's willingness to accept any hint of government largesse when it comes to deficit spending. Last week, Chancellor Rachel Reeves presented the governing Labour Party's budget to the UK Parliament, including elements of fiscal easing not expected by investors. The markets for gilts, government bonds issued by the UK Treasury, sharply sold off and reached their weakest levels in a year. But selling has abated since, and the reaction was altogether sanguine compared with the rollout of former Prime Minister Liz Truss' fiasco of a mini-budget two years ago.

The US government does have a critical support mechanism shared by no other sovereign lender in the world: the status of the greenback as the world's primary reserve currency. Dollars grease the pipes through which most global trade and finance is conducted.

The ultimate question, Dixon says, is whether global investors continue to see the US as a safe and reliable place to do business. "Will we start to see people truly questioning the integrity of our institutions?" he asks. "That's a big tail risk. Once the genie is out of the bottle, it's hard to get back in."

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Illustration: Connor McCann for Bloomberg Businessweek

Marc Levine was used to leasing a new Mercedes-Benz sport utility vehicle every three years, like clockwork. He liked driving a new car and not having to worry about maintenance or running out of warranty coverage. But when he returned to his dealer last year to replace his 2018 GLE 350, he was in for a shock: For the newer version of the same model, his monthly payment would nearly double, to almost $1,200 from $640.

"Are you kidding me?" Levine, a cardiologist who lives with his family in South Florida, asked his dealer. He looked at mass-market brands—a Jeep Grand Cherokee and a Toyota Highlander—and the monthly payments on those had grown close to what he'd paid on his previous Mercedes. So finally he asked: "You got anything pre-owned?"

And with that, a lifelong new-car buyer joined today's swelling ranks of used-car buyers. Levine purchased a three-year-old Mercedes E-Class sedan with a monthly payment of $748. He says buying used is his "new normal," because prices on new cars have become "ridiculous," but he's not happy about it.

"I was never a used-car buyer, because I just felt like that was somebody else's nightmare that I didn't want," says Levine, 61. "But what choice did I have?"

Car buyers across America are dropping out of the new-car market, writes Keith Naughton, and the sticker shock helps explain some voters' economic concerns: Even Some High-Income Americans Can't Afford New Cars Anymore

Emiterio Fraire (right) and sons Juan Carlos (center) and Jose Egui (left). Photographer: Kendrick Brinson for Bloomberg Businessweek

Carpets have been good to Juan Carlos Fraire. At age 18, lacking even a high school diploma, he started as a forklift operator at a mill in the northwest Georgia town of Dalton, the floor-covering capital of the world. Over the years, Fraire worked his way up to various administrative positions, finishing high school and getting a BA in computer science along the way. Now 43, he leads a team in the human resources department of Engineered Floors Inc., one of a dozen or so carpet makers in the town of 35,000. "I was kinda doing everything," he says. "Friday, Saturday, Sunday at the plant, and throughout the week I went to school."

Fraire's success is hardly unique in Dalton—or even in his family. His father, Emiterio, got a job in 1976 driving a forklift at a Dalton carpet plant, after a decade working on farms across the US. For Emiterio the factory gig was repetitive, grueling—and a total relief compared with what he'd been doing. "I never made so much picking chiles or cherries," he says. "I started working 12-hour shifts and felt like I was in heaven."

People like the Fraires have been instrumental in a dramatic turnaround for Dalton. Two decades ago, the city—90 minutes up Interstate 75 from Atlanta—was at risk of losing its primary industry as the carpet factories struggled to find workers and considered moving overseas. But while a few Dalton companies decamped to China or Mexico, the strongest carpet makers snapped up smaller rivals and invested in local production. And over time, migrants from Latin America became the heart of the workforce.

Today, Latinos make up more than half of Dalton's population, and they represent a big share of the carpet industry's labor force. Manufacturers have spent untold time and energy helping to train those employees—many second-generation citizens, born in the US—who frequently move up from entry-level millwork to supervisory positions. Rather than chase native Georgians out of the mills and into the unemployment lines, they've helped the place prosper.

Yet Dalton voted for Donald Trump and his anti-immigrant rhetoric in the 2016 and 2020 elections, writes Joel Millman. Some longer-term residents still see Dalton as an example of what a new group of workers can bring to a community: An Immigrant Workforce Thrives in Georgia's MAGA Heartland

$251 billion

That's how much has been erased from the stock market value of LVMH's luxury brands in China since March. Upmarket brands are scrambling to adjust strategy after being wrongfooted by the rapid downturn in Chinese spending.

"Politicians have to realize that their management is disastrous, no matter which party they belong to."

Alfonso Tarazona

of Paiporta, Spain

The king and prime minister of Spain arrived at the scene of a national tragedy to a hostile crowd chanting "murderers" and hurling mud at them. Read the full story here.

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