A global bond market rout intensified yesterday while the dollar strengthened as investors bet that US president-elect Donald Trump’s commitment to economic stimulus will herald faster growth and the return of inflation.
Since Mr Trump’s surprise win in last week’s election, investors have begun to question long-held consensus forecasts for subdued inflation and mediocre growth that underpinned a rally in bonds over the summer. Yields on US, UK, German and Japanese government debt are now rising from record lows and fixed-income investors have lost nearly $1tn since the election.
The 30-year US Treasury yield jumped above 3 per cent for the first time since January before paring its losses while 10-year yields rose 4 basis points to 2.19 per cent, the highest level since January. Ten-year UK gilt yields regained pre-Brexit vote levels, while the yield on the German 30-year bond briefly moved above 1 per cent for the first time since early May. Yields rise as bond prices fall.