What Trump’s return to the White House could mean for global bond yields | Real Time Headlines

Donald Trump’s US election victory exacerbating people’s concerns higher priceprompting strategists to rethink the outlook for global bond yields and currencies.

This is widely believed President-elect promises tax cuts high tariffs It can promote economic growth, but it will expand fiscal deficits and exacerbate inflation.

Trump’s return to the White House is considered likely to undermine U.S. economic development. Fedof interest rate cut cyclemay maintain the upward trend in government bond yields. Bond yields tend to rise when market participants anticipate higher prices or larger budget deficits.

Alim Remtulla, chief foreign exchange strategist at EFG International, said it was “untenable” for the Fed to continue its easing program while yields are rising.

“Ultimately, either the Fed will have to pause cutting rates because the economy is no longer at risk of recession, or the economy will turn around and yields will collapse because a recession is imminent,” Remutula told CNBC via email.

He added: “Trump’s election raises the possibility of a trade war and increased fiscal spending.”

Benchmark US 10-Year Treasury Bond Yields have risen sharply since Trump defeated Democratic candidate Kamala Harris in the election in early November, but the gains have eased in recent days.

On Wednesday morning, the 10-year Treasury yield rose more than 3 basis points to 4.4158%. Yields and prices move in opposite directions. 1 basis point equals 0.01%.

“There is also a possibility that the Trump campaign’s remarks are for electoral purposes and that his governing style will be closer to the status quo. This will also help the euro zone avoid recession and boost the (euro zone) economy. EUR),” he added.

German 10-year term The euro zone’s benchmark government bond yield was 2.337% on Wednesday, slightly lower during the session. The output is 2 years Meanwhile, German bunds rose about 1 basis point to 2.151%.

Shannon Kirwin, deputy director of fixed income ratings at Morningstar, said a large portion of investors expect European bonds to hold up “pretty well” over the next few years, while the euro is expected to weaken.

“Even before the U.S. election, the bond fund managers I spoke to were unanimous that the European bond market offered more attractive value than the U.S. market,” Cowen told CNBC via email.

“As a result, many managers have positioned their portfolios slightly toward European credit and away from U.S. corporate bonds,” she added.

To boost U.S. revenue, Trump suggests he could implement package of policies 20% tariff Imposition of tariffs on all goods imported into the country up to 60% For Chinese products and a Up to 2,000% On vehicles manufactured in Mexico.

At the same time, regarding the European Union, Trump said that the 27-country European Union will pay “big price“Because we’re not buying enough U.S. exports.

“We heard from managers in both markets that they prefer to maintain some level of preparedness – for example by improving quality or choosing to hold more cash than usual – in order to be able to take advantage of a potential drop in volatility. This is Road,” Coven added.

Sameer Goel, global head of emerging markets research at Deutsche Bank, told CNBC: “Asian road signOn Tuesday, the risk of rising U.S. inflation during Trump’s second term appeared to have yet to be priced in.

When asked how Trump 2.0 would affect Asian economies and regional currencies, Goel said it could lead to a widening inflation gap between the United States and Asia, which could lead to further currency weakness.

“I think, as always, individual central banks and countries are going to do things differently, but I think there’s more of a contradiction here than an offset because tariffs could end up being more disruptive and damaging to economic growth,” Goel said. .

“On the other hand, this could trigger inflation, depending on energy price trends or other issues such as currency weakness, which could impact some countries more than others,” he added.

For Asian currencies, analysts at Mitsubishi UFJ Financial Group (MUFG) said explain Investors have yet to fully digest the potential scale of U.S. tariffs on China and elsewhere.

For example, analysts at Mitsubishi UFJ Financial Group said in a research report released on November 7 that imposing 60% tariffs on Chinese products would require the yuan to depreciate by 10% to 12% against the dollar. Tariff retaliation could make the situation worse, and other countries risk raising tariffs on Chinese products.

Analysts at Mitsubishi UFJ Financial Group said Asian currencies with higher exposure to China are considered more vulnerable to Trump’s tariffs, citing the Singapore dollar, Malaysian ringgit and South Korean won as examples.

Strategist at ING, ABN AMRO explain In a research note published earlier this month, financial markets tend to engage in “a lot of second-guessing” about possible outcomes.

“Our advice is not to think too much, but to firmly believe that the new government’s plans to loosen fiscal and tighten immigration policies, coupled with relatively high interest rates and protectionism in the United States, provide a strong basis for a dollar rebound. Reasons,” ING said in a report released on November 13.

“Yes, the U.S. economy may eventually overheat, but 2025 should be the year to inject more air into any potential dollar bubble,” they added.

Meanwhile, European currencies are expected to underperform.

ING strategists said they expect risk premiums to peak from the end of next year, meaning that even if the euro is able to stay above dollar parity until then, “we see all the conditions for a structural shift from 1.05 to 1.10″ next year. It will reach the range of 1.00-1.05”.

ING said Scandinavian currencies such as the Swedish krona and the Norwegian krone could be vulnerable to downside risks, while the British pound and Swiss franc were expected to “marginally outperform” the euro.