Why Bond Yields Are Rising After Trump’s Victory

Published On Nov 7, 2024, 1:17 PM

Yields on government bonds are rising significantly, reflecting investor concerns about inflation due to anticipated tax cuts and increased government spending policies from President-elect Donald Trump. As his victory was announced, the yield on 10-year Treasury notes surged to 4.35%, compared to around 3.8% in early October. This surge in yields occurs despite the Federal Reserve cutting interest rates, indicating a disconnect between stock market optimism and bond market pessimism.

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The rise in bond yields suggests that investors are expecting inflation and increased government spending, which could result in higher interest rates in the future. Given this environment, bonds could face pressure as yields rise further. Conversely, equities, particularly those that benefit from fiscal stimulus, are favored. Therefore, it may be prudent to evaluate positions in sectors that could prosper under expansionary fiscal policies.

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