Donald Trump's surprise victory in Tuesday's Presidential elections has ignited an even more shocking reaction in global bond markets that could slow the pace of stock gains as investors nurse billions in losses and central banks slow the pace of money printing.
Government bond prices are falling around the world at the fastest pace in more than year Thursday, lifting benchmark yields to multi-month highs as investors prepare for what could be the biggest peacetime spending spree in U.S. history. President-Elect Trump's plans to reform corporate and personal taxes could, if pushed through a now-friendly Congress controlled by Republican lawmakers, provide a $9.5 trillion stimulus to the world's biggest economy over the next 10 years.
The unprecedented fiscal expansion - about half of U.S. GDP - could also add more than $5.3 trillion to the country's already staggering $14 trillion in outstanding debt, according to the Committee for a Responsible Federal Budget.
Bond investors reacted in typically nervous fashion, lifting yields on 10-year U.S. Treasury past 2.12%, the highest since January. Benchmark 10-year German bunds, long held down by the European Central Bank's massive €1.4 trillion ($1.5 trillion) quantitative easing programme, have gone from trading at a near-zero at the peak of the election chaos early Wednesday to 0.32% Thursday, the highest since March.
Bloomberg calculated the single-day loss for global bond investors at $337 billion, a trend that is likely to continue as investors place increasing bets on a U.S. Federal Reserve rate hike next month and re-calibrate assumptions for inflation and growth on the back of Trump's 'shovel-ready' infrastructure boom.