The impact of Treasury yields on US presidential approval, 1960-2010

The ‘power of bond markets’ is a widely assumed and poorly understood feature of the global economy. We demonstrate that even in a bond market as stable as the United States this influence is considerable. In this article we scrutinize a particularly direct influence, the impact of U.S. Treasury yields on presidential approval rates. Our empirical analysis from 1961-2010 demonstrates that rising/falling bond yields lead to a decline/increase in approval rates. We show that this impact is mediated via the U.S. mortgage market. The stronger the rise in mortgage rates, the stronger the influence of Treasury yields on presidential approval. We then outline the broader possible political impacts of this, particularly given foreign and domestic central bank ownership of US Treasuries.