U.S. government bond investors on Monday unwound some of the trades that were put in place on expectations of a second U.S. presidency of Republican Donald Trump, as U.S. President Joe Biden’s exit from the presidential race was seen as improving the Democrats’ elections odds.
“The market’s response to the presumed change to Harris is a slight offset to the ‘Trump-trade’ of renewed inflationary angst,” analysts at BMO Capital Markets wrote in a note. Long-dated bond yields tend to reflect market expectations of the long-term trajectory of economic growth and inflation, while shorter-dated debt securities typically move in line with expectations of monetary policy changes.
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