Trump Victory impacts bond market: $1 Trillion Bond sell-off


Trump Victory impacts bond market as investors would likely invest in stocks more than bonds. This has marked the long-awaited end of the bull run in bonds over 30 years. Are investors giving up hope on bonds?

14 November, AtoZForex – Bets on faster U.S growth and inflation made investors go for stocks more than bonds, it’s only been two days and already more than $1 trillion in the global bond market are wiped out. Trump’s victory resulted in the worst rout in the bond market in almost a year and a half with a $1 trillion loss.

A factor influencing the large loss deals with the expectations of Trump’s plans will boost business investments and spending, while inflation is expected to fire up. Chief executive officer of Los Angeles-based DoubleLine Capital which has more than $106 billion in assets, Jeffrey Gundlach stated;

“We’ve had a sentiment shift in the bond market. We’ve seen it, too. People have already started reallocating out of bonds and into stocks, the cracks have been forming for five years – we’re in this slow-grinding higher phase in yields.”

The ripple effect of Donald Trump’s US presidency

The blue chip Dow Jones industrial average recorded its highest close in five years on Friday. The yield of the 10-year German Bund rose to the highest in eight months, and the 10-year British gilt yield rose to its highest since the Brexit vote on June 23.

Aside the winners, there were also institutions who experienced the negative sides of the new US president. Bank of America Merrill Lynch’s Global Broad Market Index decreased by 1.18 percent, which is the highest drop down since June 2015. This drop down values more than $1 trillion, its U.S Treasury index fell 1.91 percent decline on the total return basis, which is the highest weekly drop down since June 2009.

Are investors giving up hope on bonds?

Investors who loaded up bonds, believing in protracted easy monetary policies worldwide because of the global economy, are not ready to give up on it yet. They are still depending on pension plans and insurers, along with the European and Japanese investors, who are fighting with the negative yield at home.

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