Global investors riled by bond market selloff as “tantrum” dawns

London: So, there’s been quite a stir in the financial world lately. A big selloff in government bonds is causing quite the ruckus, and it’s all tied to some uncertainty around Donald Trump’s upcoming policies.

Just the other day, 10-year Treasury yields shot up past 4.7%, which is the highest we’ve seen since April. And it’s not just the U.S.; UK bonds are also hitting highs we haven’t seen since 2008. This has led to a bit of a currency scramble, with the pound dropping over 1% and the euro inching closer to that $1 mark.

Even though central banks were feeling pretty good about inflation being under control for 2024, it seems like price pressures are creeping back in. Trump’s plans for higher tariffs and tax cuts could stir the pot, pushing inflation up and making it tough for the Federal Reserve to lower interest rates.

One strategist mentioned that the start of 2025 was bound to be tricky, especially with all the new bonds and policy changes coming from the U.S. administration. He warned that we might be looking at a tantrum in the bond market, with yields possibly hitting 5% for 10-year bonds.

The S&P 500, which had been doing well after Trump’s win, is starting to show some signs of weakness.

Meanwhile, other countries are also trying to get their finances in order and are ramping up bond sales. Long-term yields are climbing, partly due to the flood of new bonds this year. In fact, 30-year Treasury bond yields have jumped 60 basis points in just a month, nearing that 5% mark, which is pretty rare these days.

This situation is pushing the premium of 30-year yields over two-year yields to its highest level in nearly three years. Analysts are saying that the big bond pipeline is a major factor in this steepening curve.

In the UK, 30-year gilt yields have reached their highest since 1998, raising concerns about how higher borrowing costs will affect the already shaky finances of the British government.