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'Trump Thump' whacks bond market

Monday, November 14, 2016 - 01:43

The U.S. dollar has hit an 11-month peak as the risk of faster domestic inflation and wider budget deficits if Donald Trump goes on a U.S. spending binge sent Treasury and other benchmark global bond yields ever higher. Ciara Lee reports

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It shocked the world but five days on markets continue to shrug off concerns over Donald Trump's election win. Asia was mixed but German stocks rallied in morning trade underpinned by gains in banks and mining sector stocks. (SOUNDBITE) (German) HEAD OF CAPITAL MARKETS ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: "The surprise rally of German stocks continues. The things that Trump said on the election trail will definitely not happen during this office term. Secondly: the euro is weak and this helps exports, and thirdly if Trump makes progress with the U.S. economy, particularly its infrastructure, then German firms will also profit." While markets seem confident for now that Trump may be good for the economy and spur growth, worries remain over his longer term intentions. And that's impacting bond markets. (SOUNDBITE) (English) CHIEF MARKET ANALYST AT CMC MARKETS, MICHAEL HEWSON, SAYING: "If you're looking at equity markets for a guide as to how markets perceive Donald Trump, then I think you are looking in the wrong area. I think bond markets are probably a better barometer of where the risk lies. And I think there is a concern that if bond yields start to edge even higher from where they are now, we could actually see a little bit of a squeeze on borrowing costs of those areas of the European economy in particular that can least afford it." The U.S. dollar hit an 11-month peak on bets that Trump's policies will push up inflation - prompting investors to dump bonds. Italian 10-year yields broke above 2 percent for the first time in over a year. German 30-year bond yields broke through 1 percent for the first time in six months. while German 10-year yields - the euro zone benchmark - rose to their highest since January. According to Bank of America Merrill Lynch in just two days of selling last week more than $1 trillion was wiped off global bond markets.

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'Trump Thump' whacks bond market

Monday, November 14, 2016 - 01:43