{LONGTERMINVESTORS} Trending Insights - Trump driven US bond market sell-off likely to abate in coming months...

Trending Insights – Trump driven US bond market sell-off likely to abate in coming months…

 

The “Trending Insights” report focuses on themes impacting markets globally. In the current report, we are focusing on the ongoing US bond market sell-off since the US Presidential verdict on November 8. Historical evidence suggests that a surge of 100 bps on US 10 year treasury note (current surge of 90 bps) triggers a cooling-off trend in yields in the next couple of months. This cool-off in bond yields has triggered risk-on sentiment in various asset classes including Emerging Market equities in the medium term.

Sell-off in bond market on fiscal stimulus hope post Trump victory

 

Historically, the yield surge starts to abate in four to six months when the surge reaches around 100 bps. The current surge in yield is its fourth month.

 

                                 Phases post abatement of yield surge have boded well for asset classes

 

     S&P 500 has seen strong price performance                    Nifty has displayed outperformance vs. EM 

 

 

However, caution is advised as currently the Fed’s dot plot suggests two rate hikes in 2017. If that is pushed up on the back of higher inflation and growth, then bond yields may continue to surge. Further, in case existing QE programmes of ECB, BoJ are reduced then bond yields may surge.

 

For details, click on the link below,

http://content.icicidirect.com/mailimages/IDirect_TrendingInsights_Bond_Nov16.pdf

 

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