In a morning that will do little to calm the markets, Donald Trump has told the BBC that Benjamin Netanyahu did not defy him. This assertion, coming from a man whose relationship with truth is notoriously volatile, has been met with raised eyebrows at the Foreign Office. The claim is as improbable as a gilt yield falling on a bond auction day.
Netanyahu's recent actions, including the expansion of settlements and defiance of US policy, have been a clear signal to any observer with half a brain. The market for Trump's statements is currently pricing in a high probability of default. The Foreign Office's scepticism is entirely rational.
It reflects a prudent discounting of political risk. In a world of capital flight and fiscal irresponsibility, clear-eyed analysis is a scarce commodity. The bottom line: Trump's credibility is trading at a steep discount.
Investors should treat this claim with the same caution they would a junk bond.
