When people think about investing, they are often drawn to the stock market and it is reported in the financial press. But in reality, the biggest market is the bond market mostly accessed by institutions or institutionalized accounts. While the stock market is important and when a company makes money it is celebrated, when a company does not make money and declares bankruptcy the reality is bond holders are paid first, then preferred stocks and finally common stocks are left picking up the pennies that are left. The bond holders hold the cards, everyone else watches.

The bond market is the risk return of paying back the debt owned. The higher the risk, the higher the interest rate. For generations, the top country in the world by far has been bonds backed by the US government. It is one of the great reasons why it is the default currency of the world. If the local currency is being ravaged by inflation, by instability the powerful greenback buys goods and services.

In an article by Coley Smith and Joe Bennison of the New York Times, the House of Representatives controlled by the Republican Party passed what President Trump calls a big, beautiful bill. It does many things, but for bond holders, it increases the debt in the future. That coupled with existing debt, bondholders are beginning to seriously ask is the country’s debt becoming unmanageable?

Yields on US bonds, which underpin consumer and business interest rates around the world, from mortgages to corporate loans. Yields rise as prices for bonds fall. Higher yields reflect investors’ concerns that buying its debt has become more risky.

If President Trump is correct and the economy gets back on a good path – the economy starts growing, inflation stays down – you might see a demand for American asset. said Christopher J Waller, a governor at the Federal Reserve.

Ajay Rajadhyaksha, global chair of research at Barclays Bank said, it was increasing plausible that the central bank will not cut, not raise rates, but do nothing all year.

This year the government will spend more than $1 trillion on interest payments on its debt, which is more than the defense budget and twice the amount from 5 years ago.

Despite the uneasy mood across Wall Street, financial markets are still functioning smoothly.

Linking to dividend paying stocks, similar to individuals, when their debt payments get out of hand, there is remarkably little savings and equity to fall back on. The bond market looms in the background most of the time, but it is the force that drives the economy. One way to keep the bond market in the background is invest in profitable companies because they make profits which means they have choices and can reward shareholders through buybacks and dividend payments.

There are more questions than answers, till the next time – to raising questions.