By Charlie Morris – The Fleet Street Letter (GBR) –
In the immediate aftermath of Donald Trump’s victory, the race is on to try to understand the shape
of the new world order.
There will be change, and so far that has been felt through the bond market which has taken a turn for the worse.
The Fleet Street Letter has long argued that the bond marke was overvalued due to excessive and unsustainable intervention from the central banks.
The US ten-year Treasury had a yield below 1.4% in the aftermath of the Brexit vote. That has turned
sharply higher and now sits at 2.2% – a one-year high.
The shorter-dated two-year bond now trades at 1%.
With interest rates still at 0.5%, the US bond market is sending a strong signal that a rate hike
at the next meeting of the Federal Open Market Committee on 14 December is now inevitable.
If inflation starts to rise, which is expected in an era of higher wages and fiscal spending, expect tightening to continue into 2017.