A sharp selloff in some of the world’s biggest government bond markets and a continued rise in the dollar are sending shockwaves through financial markets, with the pain seen deepening as uncertainty grows over U.S. President-elect Donald Trump’s policies. On Wednesday, the 10-year Treasury yield, tied to trillions of dollars in daily global transactions which use the note as a benchmark, jumped to above 4.7%, their highest since April, and UK peers hit their highest since 2008 .
This unleashed a fresh wave of selling in currencies against the greenback, including sterling, which slid more than 1% before slightly recovering, and the euro, which was headed closer toward the $1 mark. The S&P 500, which rallied post Trump’s win, has recently started to falter, although it has clawed back some of those losses. Trump, in a press conference at Mar-a-Lago on Tuesday, decried high U.S. interest rates despite the Federal Reserve in the midst of an easing cycle.Central banks all but declared victory over inflation in 2024, but a number of metrics show price pressures are rising again. Trump’s plans for higher trade tariffs, tax cuts and deregulation threaten to push up inflation and strain government finances, thereby also limiting the Federal Reserve’s scope to cut interest rates. “The bond market sure feels like it has lost confidence in the Fed and Treasury,” said Byron Anderson, head of fixed income at Laffer Tengler Investments in Scottsdale, Arizona. “The short sellers are now the captain of this boat and there is plenty of pressure on this market. We are starting to see sloppy Treasury auctions with tails everywhere on the curve,” he added. U.S. auctions of three-year and 10-year notes this week were underwhelming, pricing in higher than the expected rate at the bid deadline, reflecting weak demand. This suggested that investors sought a premium to buy the Treasury note
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