Throw in a trade barriers (such as a 45% trade tariffs on Chinese goods) and a move to bring production back to the USA and you have a view that prices must increase (inflation) and in-turn you have a view that the Fed will have to be more aggressive in tightening policy in 2017. That could lead to lower bond prices because inflation erodes the real returns on bonds.
Amid expectations of higher spending and inflation under Trump, yields on U.S. Treasury 10-year notes reversed an initial plunge to 1.716 percent and bolted to 2.09 percent overnight, the highest since January. Italian bonds are getting crushed, Bunds, Gilts, and JGBs all seeing yields spike as developed market bond yields hit 6-month highs and the U.S. yield is at its steepest since 2015.
While there's still an edge of uncertainty, on Wednesday markets chose to focus on elements from Trump's acceptance speech, in which he discussed spending on infrastructure projects that could boost growth.
U.S. Treasury yields climbed on Thursday, extending steep gains in the previous session, as investors continued to price in higher interest rates under an incoming Republican administration that is expected to increase spending seen as inflationary. Analysts were more than a little puzzled by the moves."An astonishing turnaround in risk appetite pushed equities and Treasury yields higher", said Imre Speizer, an economist at Westpac.
Manhattan miracle: We have just witnessed one of the most incredible spectacles in financial markets you will ever see.
Curve steepening persists with the 2-10-year spread wider at 117 bps. There were $31.6 billion in bids, resulting in a bid-to-cover ratio of 2.11, the lowest since February.
Kelly refuses to put 49ers defensive woes on coordinator
Saints fans have a real reason to cheer for their team, and this has all the makings of the most important game of the season . It was insane fun, but the defense was in the middle of an implosion, and Rob Ryan was two games away from getting fired.
In early afternoon trading, benchmark 10-year notes were last down 10/32 in price, yielding 2.100 percent, up from 2.064 percent late on Wednesday.
"If Trump's policies boost GDP as expected, it reduces the need for the Fed to keep yields low and may even provide a window of opportunity for modestly reducing their balance sheet in 2017", said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors, in Minneapolis.
Copper alone added 3.4 per cent while iron ore surged 4.7 per cent (.IO62-CNI-SI) to its highest since January 2015.
Euro zone inflation expectations as measured by five-year inflation swap rates posted their biggest rise since August last year on Thursday, and the 30-year German yield surged nearly 20 basis points.
Meanwhile, The Korea Composite Stock Price Index (KOSPI) ended 2.26 percent higher at 2,002.60 points. As of November 9, there was an 82 percent chance they will move at their December 13-14 meeting, up from 76 percent at the end of last week, according to data compiled by Bloomberg based on futures.
Bloomberg calculated the single-day loss for global bond investors at $337 billion, a trend that is likely to continue as investors place increasing bets on a U.S. Federal Reserve rate hike next month and re-calibrate assumptions for inflation and growth on the back of Trump's "shovel-ready" infrastructure boom.