Trump's 'Project Freedom,' the Strait of Hormuz, and US Bond Yields
President Trump posted a lengthy message on his social media platform announcing 'Project Freedom,' an operation to help vessels stranded in the Strait of Hormuz get out, starting Monday morning Middle East time. He described talks with Iran as positive and the vessel movements as a humanitarian measure. However, the Wall Street Journal reported the US Navy would not directly escort ships, and Axios said the US would instead share safe-route information with other countries.
Hosts questioned the practical value of the announcement, noting that between several hundred and up to 2,000 vessels have already left the strait since the war began through negotiation or independent risk-taking, without military escort or insurance guarantees. They interpreted the announcement instead as a market-soothing gesture, coming after oil prices topped $122 a barrel late last week, a hawkish FOMC tone, and the US 10-year Treasury yield climbing to near 4.4%.
Trump's sensitivity to rising bond yields was attributed to US interest payments on national debt already exceeding defense spending at roughly 1,500 trillion won, his own substantial bond holdings, and the fact that the bond market dwarfs the stock market in size. Hosts noted a recurring pattern where dovish gestures follow whenever the 10-year yield approaches 4.5%.
Hosts maintained a negative view on US equities overall, citing concerns about the sustainability of the US economy. They noted Wall Street's year-end S&P 500 targets imply only about 10% further upside from current levels, and cited economist Robert Shiller's comment that the S&P 500 could plunge 30%.