Long-dated US government debt sold off on Tuesday as investors worried that Donald Trump’s attempted firing of a Federal Reserve governor could undermine faith in the world’s most important central bank.
The sell-off pushed the gap between long and short-term yields close to its widest in three years. Investors are betting that increased political pressure will lead to lower rates in the short term but higher rates in the future as Fed officials are forced to fight higher inflation.
Trump announced on Monday night that he was firing Fed governor Lisa Cook “effective immediately”, citing allegations of mortgage fraud. Cook’s removal would allow the US president to select a replacement more open to interest rate cuts.
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