Bonds sell-off continues as investors bet on rate rise

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http://www.bbc.com/news/business-37972909

A wave of selling sweeping across bond markets resumed on Monday as investors continued to digest the impact of a Donald Trump presidency.

US and European bond prices have sunk in expectation that he will enact inflationary policies that speed the pace of interest rate rises.

On Monday, some bond yields – which rise as the price falls – hit their highest for more than six months.

Bonds globally lost $1.29tn (£1tn) last week, according to Bank of America.

And there is no sign that the bond sell-off is easing, depressing the value of some pension investments and making it more expensive for countries and companies to borrow money.

On Monday, the 30-year US Treasury jumped above 3% for the first time since January. In the UK, the 10-year gilt yields returned to levels not seen since June’s Brexit referendum vote. And German 30-year bunds rose above 1% for the first time since early May.

Italian bonds have been among the most affected. Rome’s 10-year yields rose four basis points to 2.01% on Monday, their highest in 14 months.

“It is a continuation of this recent trend. There are still these expectations that inflation could go up if the US takes a more expansionary fiscal stance,” said DZ Bank strategist Daniel Lenz said.

Jim Cielinski, head of fixed income at Columbia Threadneedle, said the sell-off trend was not surprising, but the “ferocity of the reversal” was.

And in a research note for Societe Generale, analyst Daniel Fermon said that rising interest rates may not be a good thing.

“As central banks are now less active in the bond market and Trump expects to cut taxes and launch a $1tn infrastructure investment plan, increasing the deficit, we believe rising US long-term rates remain a major risk for financial markets,” he said.

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“US and European bond prices have sunk in expectation that he will enact inflationary policies that speed the pace of interest rate rises.”

lots of violent moves up and down..

“As central banks are now less active in the bond market and Trump expects to cut taxes and launch a $1tn infrastructure investment plan, increasing the deficit, we believe rising US long-term rates remain a major risk for financial markets,”

blame trump..

401

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~ by seeker401 on November 18, 2016.

2 Responses to “Bonds sell-off continues as investors bet on rate rise”

  1. Sounds more to me like their going to finally allow rates to seek their own level, instead of keeping them artificially low to feed Wall Street during it’s rather long period of lousy sales.
    Maybe the banks won’t crash, after all…but the “Great Correction” is still coming, as when borrowing becomes expensive again you won’t be able to use that borrowed money to float stock prices.
    Traditionally, a run on the bond markets is a precursor to a market crash…but with Trump cutting foreign aid and revitalizing Main Street by ending foreign dumping in our markets, there is no real way to predict what will happen in the next four (hopefully eight) years.
    Bringing back strontg market fundamentals and re-empowering American consumers with jobs and stability in their future is a great long-term strategy, but the shake up makes the short term results an unknown.
    Will just have to stay nimble and roll with the immediate changes.
    We wouldn’t be in this mess if they had not started manipulating the markets & allowed these massive trade imbalances in the first place.

  2. Reblogged this on World Peace Forum.

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