'Trump Thump' whacks bond market for $1 trillion loss

Mon Nov 14, 2016 5:39am EST
 
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By Richard Leong and Jennifer Ablan

NEW YORK (Reuters) - Donald Trump's stunning victory for the White House may mark the long-awaited end to the more than 30-year-old bull run in bonds, as bets on faster U.S. growth and inflation lead investors to favor stocks over bonds.

A two-day thumping wiped out more than $1 trillion across global bond markets worldwide, the worst rout in nearly 1-1/2 years, on bets that plans under a Trump administration would boost business investments and spending while firing up inflation.

"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,” said Jeffrey Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital, which has more than $106 billion in assets.

"The cracks have been forming for five years – we’re in this slow-grinding higher phase in yields,” he said.

The stampede from bonds propelled longer-dated U.S. yields to their highest levels since January with the 30-year yield posting its biggest weekly increase since January 2009, Reuters data showed.

In the stock market, the blue chip Dow Jones industrial average finished out its best week in five years on Friday as it marked a record high close.

The 10-year German Bund yield rose to its highest level in eight months, while the 10-year British gilt yield climbed to its highest level prior to Britain's decision to leave the European Union on June 23, known as Brexit.

Bank of America Merrill Lynch's Global Broad Market Index fell 1.18 percent this week, the steepest percentage drop since June 2015, which is equivalent to more than $1 trillion. Its U.S. Treasury index suffered a 1.91 percent decline on a total return basis, the biggest weekly drop since June 2009.   Continued...

 
Morning commuters pass by the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016.  REUTERS/Brendan McDermid