On November 8, in the US bond market, it is expected that yields, which had increased before the presidential election, would begin to decline. A photo in Washington, DC in 2008 (2024 Reuters/Jim Young)
NEW YORK (Reuters) – Expectations in the U.S. bond market yield, which had risen before the presidential election, are fading. Mr Trump’s economic policy, now certain to win the election, is expected to expand fiscally and stimulate the economy, but it is also expected to accelerate inflation, and there are fears that the pace of US Federal Reserve interest rate cuts, which have just begun, will slow down. Some say a “bond vigilante group” will emerge to warn against loose finance.
US bond yields have risen more than 70 basis points (bp) since mid-September as expectations of a Trump victory have risen.
BofA Global Research recently raised its short-term target for government bond yields to 4.25-4.75% from 3.5-4.25%.
If Trump’s Republican Party gains a majority in both houses of Congress, creating a “triple red,” it will be easier to implement Trump’s policies.
Andrzej Skiba, head of fixed income BlueBay US at RBC Global Asset Management, expects further selling in long-term bonds (rising yields). “If tariffs of the level we expect are introduced, they will act as a barrier to lowering interest rates,” he said.
The Committee for a Responsible Federal Budget, a bipartisan group of former US lawmakers, estimates that Trump’s fiscal policies could increase the debt by $7.75 trillion over the next 10 years.
“Triple Red is making things difficult,” said Bill Campbell, a portfolio manager at DoubleLine who is concerned about the fiscal situation under a second Trump administration and expects longer-term interest rates to rise further.
It’s a warning line <4.5%>
However, sharp increases in yields make stocks less attractive. Over the past year, market corrections have occurred when the 10-year Treasury yield is near or above 4.5%, said Angelo Kourkafas, senior investment strategist at Edward Jones. “(4.5%) is considered a level that people pay attention to,” he said. The yield on the 10-year bond was 4.34% at the end of the 7th.
Tony Rodriguez, head of fixed income strategy at Nuveen, said the main effect of the election is that the pace of interest rate cuts I’m looking at will be slower,” he said.
According to FF interest rate futures, the target rate of 4.5-4.75% at the end of next year is around 3.7%. It is up 1% since September.
At a press conference after the Federal Open Market Committee (FOMC) meeting, Fed Chairman Jerome Powell refrained from giving any specific comments about the impact of the next administration on monetary policy. He said the increase in output reflects an improving economic outlook, not an increase in inflation expectations.
But inflation expectations, as measured by the difference between the yield on US Treasuries and Inflation Protected Securities (TIPS), rose sharply this week, hitting a six-month high of 2.4 % Wednesday.
Dan Ivascyn, group chief investment officer (CIO) of fixed income management giant PIMCO, said he is concerned about the Fed’s interest rate cuts slowing or stopping due to a recovery in inflation.’ ‘
Rick Rieder, BlackRock’s global fixed income CIO, said on the 7th that predicting aggressive cuts in interest rates in 2025 would be “going too far.” “
Chart of Treasury’s 10-year inflation-protected securities
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2024-11-08 09:20:00
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