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Investors are selling off U.S. Treasury bonds in droves, and the Trump administration doesn’t seem to have a clue what to do about it. If you’re like me, talk of bonds, yields, and buybacks makes your eyes glaze over. But we wouldn’t spend a whole edition of the Slatest explaining the bond sell-off if it didn’t matter. So in plain English, here’s why it—and the Trump administration’s seat-of-the-pants response—could make a financial dent in your life.

Yeah, I’m going to need some context here. What is a Treasury bond? 

A Treasury bond is essentially a loan to the U.S. government. To have enough money to keep up with federal spending, the government sells bonds to banks, private companies, other countries’ governments, and even individuals. Bondholders collect interest in return for lending their money, which is known as the bond yield. Investors can buy bonds that last for different lengths of time and yield interest annually at a fixed rate over that period.

Why are these investors ditching their bonds? 

The yield on 30-year Treasury bonds hit 5.3 percent this week, its highest level since 2007. There are a lot of reasons why: Some investors may be worried about the national debt, which reached a record $40 trillion this week. Other countries have fallen victim to debt spirals, where high levels of debt lead investors to demand higher interest rates, in turn fueling more borrowing until eventually a country defaults. Deficit hawks have been warning about such a scenario in the U.S. for decades, even though most investors still (rather rationally) believe that an economic superpower will find a way to make its payments.

The bigger worry is protracted inflation, driven by Donald Trump’s trade wars and his Iran war. When inflation is higher, investors need a better return on Treasurys to make it worth their while. And because Trump keeps pushing the “Make stuff more expensive” button with tariffs and smashed the “Send oil prices skyward” button with a war of choice in Iran, investors are demanding better payouts when they loan money to the government. Ergo, higher yields.

OK, but why are higher yields a bad........

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