Donald Trump won decisively in the U.S. presidential election and the U.S. bond market celebrated by falling, at least in the immediate aftermath of the news. The market’s reaction suggests that many investors are expecting a more inflationary environment as a result of the Trump administration’s second-term policies.
The benchmark 10-year Treasury rate rose by as much as 18 basis points the day after the election, pushing the overall rate on the bond to 4.47 percent. The price of bonds and their yield move inversely, with prices falling as rates rise. A rising yield on Treasurys raises the cost of the U.S. federal government when it borrows new money or rolls over existing debts.
Many investors expect that the federal government under Trump will maintain high deficit spending amid accommodative rate policy from the Federal Reserve. So, many are selling their bonds or actively betting against bonds in…
