Global bonds lost 1.7 trillion USD in November, which probably looks that will collapse the 30-years-old bulls trade. Bloomberg Barclays Global Aggregate Total Return Index decreased by 4% in November, which is the largest collapse of the indicator since its establishment in 1990. The accumulation of economic momentum in the US together with the victory of Donald Trump in the presidential election, with promises of tax cuts and infrastructure spending amounting to 1 trillion USD, prompted investors to dump the bonds that offered almost record low yields, and to move towards equities. The notion of experts is that the 30-year bull market will no longer seems pointless.
It is expected the Fed to start raising interest rates more often than once a year, but also inflation will probably rise, and there are signals that global central banks may buy less government securities (GS) in the future. The investors withdrew 10.7 billion USD in bond funds in the two weeks after the victory of Trump, which is the biggest outflow since 2013. Meanwhile, stock indices in the US soared to record heights.
Many people started to think that this is the end of the bullish rally. Yields on 10-year US government bonds may rise to 2.7% in January, according to the experts.
The defeat erased 1.7 trillion USD from the value of global index for November, while the capitalization of world stock markets grew by 635 billion USD.
The yields on 10-year US government bonds rose by 56 basis points in November, which is their biggest jump since 2009 and is traded for about 2.38% of the London Stock Exchange. The average yield on Bloomberg Barclays Global index rose to 1.61% on November 23, after hitting a record minimum of 1.07% on July 5.
The growth in profitability shows the limitations of quantitative easing policies of the major central banks. The bonds will be particularly vulnerable if the European Central Bank decided to reduce its program of buying government bonds at the meeting on December 8.
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