{"id":271696,"date":"2025-08-12T15:57:49","date_gmt":"2025-08-12T19:57:49","guid":{"rendered":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/?post_type=short-read&p=271696"},"modified":"2025-08-12T15:57:51","modified_gmt":"2025-08-12T19:57:51","slug":"what-to-know-about-the-bond-market","status":"publish","type":"short-read","link":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/short-reads\/2025\/08\/12\/what-to-know-about-the-bond-market\/","title":{"rendered":"What to know about the bond market"},"content":{"rendered":"\n

President Donald Trump and the Republican-led Congress have implemented several major policy changes in the first seven months of 2025. Those changes include raising tariffs<\/a> on dozens of U.S. trading partners, extending Trump\u2019s first-term tax cuts and adding new ones<\/a>, and boosting spending on border security and immigration enforcement. Lawmakers have partially offset the tax cuts and spending increases by cutting Medicaid<\/a>, foreign aid<\/a>, education grants<\/a> and other federal programs.<\/p>\n\n\n\n

Many analysts project that these policies will further widen the U.S. budget deficit<\/a> \u2013 the gap between how much the federal government takes in and how much it spends. Even before the policy changes, a majority of Americans saw the federal budget deficit as a \u201cvery big problem\u201d for the country today, according to a Pew Research Center survey<\/a> conducted in January and February.<\/p>\n\n\n\n

Deficits have to be funded by borrowing, which, for the federal government, means selling bonds to investors. Those investors then resell and trade those bonds in what\u2019s generally referred to as the \u201cbond market.\u201d How the bond market reacts to the administration\u2019s actions<\/a> not only determines how much interest the government must pay to borrow money; it also influences how much interest ordinary Americans will pay on car loans, mortgages and credit card bills. That\u2019s because interest rates on all sorts of loans tend to move in the same direction.<\/p>\n\n\n\n

Here are some basics about bonds and the bond market, using data from the U.S. Treasury and from the Securities Industry and Financial Markets Association<\/a> (SIFMA), a trade group for banks, securities firms and asset managers.<\/p>\n\n\n\n

How we did this<\/summary>\n

Pew Research Center conducted this analysis to help explain the U.S. bond market, a potent yet obscure piece of the global financial architecture.<\/p>\n\n\n\n

Data for this analysis primarily comes from two sources: the Bureau of the Fiscal Service<\/a>, the arm of the U.S. Treasury Department that manages the public debt; and the Securities Industry and Financial Markets Association<\/a>, a trade group for broker-dealers, banks and asset management firms. We also consulted news reports for details on recent bond market activity.<\/p>\n<\/details>\n\n\n\n

What\u2019s a bond?<\/h4>\n\n\n\n

A bond is basically a promise to repay a specified sum of money according to rules (interest rate, timing, etc.) that are set when the bond is issued. It\u2019s an alternative to borrowing money from a bank or other financial institution. Governments can borrow from banks, too \u2013 especially institutions like the World Bank or the International Monetary Fund \u2013 but more commonly they\u2019ll sell bonds to investors when they need extra money.<\/p>\n\n\n\n

Bonds are often referred to as \u201cfixed-income\u201d investments because they typically pay interest on a specified schedule \u2013 for instance, 5% a year for 10 years, payable semiannually. Those predictable payments can make bonds attractive to a wide range of investors.<\/p>\n\n\n\n

Many types of public and private entities can issue bonds, including national governments; states, cities and counties; school districts and other specialized districts; and companies. But since this analysis is about U.S. government bonds, from here on we\u2019ll use \u201cbonds\u201d to refer specifically to those. (They\u2019re also called Treasurys or T-bonds, because the U.S. Treasury Department issues them. The Treasury also sells shorter-term instruments called bills and notes<\/a>, but for simplicity we\u2019ll refer to them all as bonds.)<\/p>\n\n\n\n

How are bonds bought and sold?<\/h4>\n\n\n\n

The Treasury raises money by selling bonds at regularly scheduled public auctions<\/a>. At those auctions, individual and institutional investors can specify how much debt they want to buy (with a $100 minimum<\/a>) and the return they\u2019re looking for.<\/p>\n\n\n\n

An investor who buys, say, a 10-year Treasury bond for $10,000, always has the option of hanging onto it. They can collect a decade\u2019s worth of interest payments before the bond \u201cmatures\u201d and they get back their original $10,000.<\/p>\n\n\n\n

But bonds can also be traded on financial markets, much like stocks. Tradable bonds are also referred to as \u201cdebt securities.” Investors can buy and sell bonds at any time before they mature.<\/p>\n\n\n\n

\"A<\/a><\/figure>\n\n\n\n

Most Treasury debt (about 78.5%, or $29 trillion as of July 2025) is tradable. Treasury securities that aren\u2019t<\/em> tradable include U.S. savings bonds and the special bonds held by the Social Security and Medicare trust funds.<\/p>\n\n\n\n

However, the bond market is much more opaque than the stock market. There\u2019s no physical building or centralized electronic exchange where trading takes place, with prices quoted publicly and in real time. Most of the time, bonds are traded \u201cover the counter\u201d \u2013 that is, between private firms called broker-dealers<\/a>, acting either on behalf of their clients or for their own accounts.<\/p>\n\n\n\n

The original issuers don\u2019t directly benefit from trading activity in the bond market. But how an issuer\u2019s bonds fare in the market can influence how much it may have to pay if (or when) it comes back to borrow more.<\/p>\n\n\n\n

Related: <\/em><\/strong>Key facts about the U.S. national debt<\/a><\/em><\/p>\n\n\n\n

What\u2019s a bond worth?<\/h4>\n\n\n\n

Investors\u2019 willingness to buy government bonds, and the price they are willing to pay, depends largely on how risky they consider the bonds and whether they can make more money elsewhere. Investors consider many factors when gauging a bond\u2019s value. Some factors involve the general economic and financial climate, such as:<\/p>\n\n\n\n