By Christopher Whittall
The wave of selling that has swept across government-bond markets since Donald Trump's election last week resumed Monday as investors continued to weigh the prospects of increased fiscal stimulus and a quicker pace of interest-rate rises.
The yield on the benchmark 10-year Treasury note reached a high of 2.238% Monday, up from 2.118% on Thursday's close after U.S. government bond markets were closed Friday. Treasury yields, which rise as prices fall, are hovering around their highest level since early January after recording their largest one-week gain in over three month's following Mr. Trump's victory.
Selling has spread across other developed-nation bond markets as Treasury yields have climbed. The yield on the 10-year Germany government bond was up 0.3% on Monday as European markets opened, on track to close at its highest level since January. U.K. government bond yields have retraced to levels last seen in the month before the Brexit vote, which triggered a sharp rally in these securities.
Developed-market government bond yields in Asia also jumped.
"The election of Trump and his promises of fiscal stimulus have opened the floodgates, with a rush to sell bonds," strategists at Societe Generale wrote in a note to clients Monday.
"We see no let-up just yet," they said. They recommended investors keep a light exposure to interest-rate risk in their portfolios.
While much of Mr. Trump's policy agenda remains unclear, the president-elect has promised infrastructure spending and tax cuts.
Many analysts say that would boost bond supply, economic growth and inflation, potentially hurting fixed-income assets. Investors are particularly concerned that an increase in signs of inflation and growth could push the Federal Reserve to raise interest rates at a faster clip than previously expected.
The Wall Street Journal's latest monthly survey of economists shows Mr. Trump's policies are expected to usher in a period of higher economic growth, inflation and interest rates.
On average, economists forecast the economy could expand 2.2% in 2017 and 2.3% in 2018 as a fiscal stimulus takes effect, up from about 1.5% over the past 12 months. Inflation, meanwhile, is seen at 2.2% next year and 2.4% in 2018.
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(END) Dow Jones Newswires
November 14, 2016 04:27 ET (09:27 GMT)
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