Using this analogy, it’s easier to understand why the bond market barely reacted to last week’s rate-friendly data and the global turmoil, especially with Iran.

The key reason: federal prosecutors opening a criminal investigation into Fed Chair Jerome Powell.

U.S. bonds are considered the safest place in the world largely because the Federal Reserve is independent from the President. That independence is a critical guardrail.

When that independence is questioned, global bond managers get nervous. China has already sold billions in U.S. bonds, and other countries are either doing the same or considering it.

Think of bonds like candy in a jar.

Less candy means each piece is more valuable, so yields (rates) go up. To get people to buy bonds, you have to offer better pricing. If demand is high, no incentive is needed. That’s why Quantitative Easing pushes rates lower: more government “candy” in the jar.

When prosecutors went after Powell, that independence came into question. As a result, fewer global buyers stepped in and some sold what they already owned. That selling pressure offset the flight-to-safety gains we normally would have seen in bonds.

Bipartisan pressure is building, including from Treasury Secretary Scott Bessent.

Cooler heads will prevail and this investigation will go away.

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below 10y US Treasury. Up is lower rates, down is higher rates.