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Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost 

December 1, 2016

Garfield Clinton Reynolds & Wes Goodman, Bloomberg

The 30-year-old bull market in bonds looks to be ending with a bang.

The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge’s inception in 1990. Gathering U.S. economic momentum and Donald Trump’s election win -- with promises of tax cuts and $1 trillion in infrastructure spending -- spurred investors to dump debt that was offering near-record-low yields and pile into stocks.

Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to start raising interest rates -- and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may be buying fewer sovereign securities going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to record highs.

“A lot of people are beginning to think that it is the end of the bull rally,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14 billion. U.S. 10-year yields may rise to 2.7 percent in January, Bridges said. “The trend is your friend.” Read more

 
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