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Working in the bond markets can be pretty exhausting. If a burned out trader had decided to take a year-long nap on December 1, 2015 with the 10-year US treasury at 2.24%, he or she would have woken up on December 1, 2016 with the UST 10-year at 2.34%. So, nothing much happened last year, right?
Wrong. So much happened it is hard to know where to start. While our bond trader was sleeping, the UST 10-year hit an all-time low of 1.50% in July 2016, the UK voted to leave the European Union and the US elected a reality TV star as its next president. With this as the backdrop, looking forward into 2017 is a fool’s errand – quite clearly anything can happen.
By mid-December, the global aggregate bond index had lost $2.4 trillion of market value since Trump’s election, suggesting that his proposed fiscal stimulus will translate into almost immediate growth and inflation.
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Arvind Rajan, |
“It is hard for the markets to price in the protectionist agenda, so they have priced in Trump without the bad stuff,” says Arvind Rajan, head of global and macro at PGIM Fixed Income in New York.
