Global bond market revolt pushes rates to decade highs as RBA tipped for fourth hike

Global bond markets are in "outright revolt" against Washington for the second time since Donald Trump returned to the White House, with investors dumping US dollar debt and pushing American and global interest rates to their highest levels in decades, according to an analysis by Ian Verrender for the ABC.

Mr Verrender writes that investors are alarmed by a national debt that has doubled since Mr Trump first took office and now exceeds $US40 trillion ($57 trillion), along with soaring inflation driven by a Middle East war that is becoming increasingly intractable. Seeking safety, investors are beginning to look elsewhere, and trust in America, the foundation of US economic power, is fraying.

The US Federal Reserve, led by the newly appointed Kevin Warsh, whom Mr Trump installed specifically to cut rates, has just delivered its first rate hike in more than three years. "It had no choice," Mr Verrender writes, arguing that money markets are now calling the tune and investors are dictating interest rate policy to central banks.

The bond markets first forced the re-elected president's hand in April last year, when his "Liberation Day" tariffs prompted a revolt and he walked back some of the trade penalties. This time, Mr Verrender says, investors are "taking no prisoners".

The upheaval is likely to have a profound impact on the Reserve Bank of Australia, which meets today with most economists expecting a fourth rate hike for 2026.

Analysis

Why This Matters

A fourth RBA rate rise today would flow directly to Australian mortgage holders already stretched by a year of increases.
US rates at multi-decade highs lift borrowing costs worldwide and heighten the risk of further financial turmoil.
Erosion of trust in US debt and the dollar challenges the foundation of American economic power since World War II.

Background

The US dollar and its position as the world's reserve currency have underpinned American global hegemony since the end of World War II, with the phrase "In God We Trust" appearing on US currency as a marker of that confidence since the 1860s and adopted as the national motto in 1956. The current unrest is the second bond market revolt since Mr Trump's return to the White House, and it follows rapid growth in national debt and inflation pressures tied to the Middle East conflict.

Key Perspectives

Bond investors: Dumping US government debt and searching for safer homes for capital, alarmed by the doubling of national debt since Mr Trump took office and by war-driven inflation. The Federal Reserve: Received a chair appointed to cut rates, but instead delivered its first increase in more than three years, with markets now effectively setting policy. The Reserve Bank of Australia: Meets today under the shadow of the global rout, with most economists expecting a fourth hike for 2026. Critics and skeptics: The first bond market revolt was defused when Mr Trump retreated on tariffs, and the "coup" language reflects market commentary rather than a coordinated challenge to Washington.

What to Watch

The RBA's rate decision today and the reasoning behind it.
Whether the Trump administration again retreats under market pressure, as it did after the April tariff revolt.
Whether US bond yields and the dollar stabilise or the rout deepens in coming weeks.

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