Trump's 'Recession' Comment Intentional?... "To Issue Treasury Bonds at Low Interest Rates"

US Government Debt Reached 52.6 Quadrillion KRW at the End of Last Month

US Treasury Bonds Maturing This Year Amount to 12 Quadrillion KRW

"Treasury Interest Rates Must Fall to Reduce Interest Costs"

Analysts suggest that US President Donald Trump is allowing the stock market to decline in order to lower Treasury bond interest rates. This is because when US Treasury bond rates fall, the federal government's interest payment burden decreases.

On the 10th (local time), the Dow Jones Industrial Average closed at 41,911.71 on the New York Stock Exchange, down 890.01 points (2.08%) from the previous trading day. The S&P 500 index closed at 5,614.56, down 155.64 points (2.70%), and the tech-heavy Nasdaq index ended at 17,468.32, down 727.90 points (4.00%).

With today's sharp decline, the S&P 500 index has fallen 8.7% from its peak last month, approaching correction territory (10% drop from previous high), while the Nasdaq index has fallen nearly 14%.

Notably, the Nasdaq index recorded its largest decline in 2 years and 6 months since September 13, 2022 (-5.13%), when it plummeted due to inflation shock. At one point during today's session, the Nasdaq's decline approached 5%. The S&P 500 index also recorded its largest drop since December 18, 2024.

The direct cause of today's sharp decline in the New York stock market was President Trump's Fox News interview comments from the previous day. When asked if he expected a recession this year, President Trump did not deny the possibility of a downturn, saying, "There will be a transition" and "because what we're doing is very big."

The market interpreted the President's response of "transition" to the recession possibility question as meaning the Trump administration is willing to accept a short-term economic downturn or sharp stock market decline if necessary to achieve its "greater goals."

Earlier, on the 6th, when asked if the delay in tariff increases on Canada and Mexico was due to stock market declines, President Trump replied, "It has nothing to do with the market" and "I don't even look at stocks."

Some interpret Trump's "recession" remarks as intentional to issue maturing Treasury bonds at lower interest rates. On the 4th, in his joint address to Congress, President Trump specifically mentioned the 10-year Treasury yield, saying, "Today interest rates fell by a very large margin. A big beautiful drop." Indeed, the 10-year Treasury yield has fallen from around 4.5% at the beginning of the year to around 4.2% currently.

Kim Sang-hoon, a researcher at Hana Securities, analyzed, "US Treasury bonds maturing this year amount to $8.9 trillion (approximately 12,000 trillion won)," adding, "The Trump administration is employing a strategy to refinance debt at lower interest rates in the long term, even while enduring market pain in the short term."

Wi Jae-hyun, a researcher at NH Futures, said, "With the combination of large-scale Treasury issuance and high interest rates, the US Treasury paid $880 billion (about 1,270 trillion won) in net interest costs last year," adding, "This accounts for 13% of total fiscal expenditure, so to reduce fiscal spending, they need to induce interest rate cuts, especially for long-term bonds."

However, some remain skeptical of these claims.

Lee Eun-taek, a researcher at KB Securities, said, "The S&P 500 has fallen 8.6% from its peak, but historically, 10% corrections happen frequently, especially during 'bubble markets,'" adding, "If Trump intended an economic recession, there's no need to fear even if the stock market falls 10%."

He continued, "The recent interest rate decline is due more to the 'term premium' (uncertainty) than Trump's intentions," adding, "The decline in Treasury yields after Trump's inauguration was somewhat expected since the beginning of the year."

Roh Jung-dong, Hankyung.com reporter dong2@hankyung.com