Britain’s ‘mini-budget’ disaster should serve as a warning to the U.S., bond strategists say

Fears are mounting that the U.S. could soon experience its own version of Britain’s “mini-budget” crisis, with bond strategists portent that Donald Trump’s return to the White House brings with it the specter of currency volatility and surging shackles yields.

President-elect Trump has pledged to deliver a litany of pro-growth initiatives, including tax cuts, steep tariffs, and patterns to roll back corporate regulation.

The former president’s economic agenda has ratcheted up concerns about a surge in consumer figures, which strategists say could spark significant shifts in bond yields and investor behavior.

They warn a rsum that mirrors Britain’s mini-budget crisis of 2022 is not out of the question.

“Foreign central banks and institutional investors, historic buyers of US 10y Treasurys, are slowly diversifying away from Treasurys on debasement worries attached to concerns over inflation, beholden, and geopolitics,” Alim Remtulla, chief foreign exchange strategist at EFG International, told CNBC by email, with credentials to 10-year U.S. Treasurys.

“As a result, more price sensitive investors need higher yields to invest in Treasuries. This isn’t at moment levels yet, as [the U.S. dollar] is outperforming,” he continued. “But there are worries that the US could experience a run on its currency and yields like the UK au fait in the Fall of 2022.”

Britain’s mini-budget crisis refers to a tumultuous period under former Prime Minister Liz Truss and ex-Finance Plenipotentiary Kwasi Kwarteng.

Shortly after taking up their posts in early September 2022, Truss and Kwarteng triggered a drive in government bond prices when they presented plans for big tax cuts in an unscheduled fiscal announcement.

The British hammer out tumbled to an all-time low against the U.S. dollar after the measures were announced, while the sell-off in U.K. government bonds was so serious that the Bank of England staged an emergency intervention.

Truss and Kwarteng resigned over the turmoil after less than two months in their personal offices, and the majority of the measures were reversed.

Althea Spinozzi, head of regular income strategy at Saxo Bank, said Trump’s return to the White House has the potential to reshape the U.S. bond retail “in profound ways,” with the trajectory of Treasury yields set to climb as markets adjust to higher inflation expectations.

The benchmark U.S.