$1.5 trillion wiped out from bond market in Trumpflation trade

The massive selloffs in the bond market after the Republican candidate Donald Trump won the Presidency on November 8th, has been popularly called as the Trumpflation trade. Donald Trump’s policies that include increased infrastructure spending have already boosted the price of the commodities, especially metals. His policies are widely being viewed as a loose fiscal one, which on the other hand, would boost the possibility of an increased monetary tightening.

As bonds declined sharply, bond yields rose. US 30-year bond yield moved above 3 percent for the first time this year, while the 10-year treasury is around 2.15 percent, highest level since January. The yield has risen more than 30 basis points since Trump’s victory. Similarly, German 10-year yield reached the highest level since February. Japanese 10-year bond has also moved above zero, highest since January.

According to Bloomberg Barclays multiverse index that tracks sovereign debt as well as corporate securities, investors are sitting on a total loss of 41.5 trillion in the bond market.   

So, mark your calendars for 5th December, when all 11 judges of the Supreme Court will sit and hear the case. The hearing is expected to last for four days and if the Supreme Court overrules the High Court ruling, then pound may start diving again with increased volatility.

If the Supreme Court upholds the High Court ruling, the pound is likely to move higher. However, such ruling is unlikely to prevent the triggering of Article 50 as most of the politicians including the prominent opposition members are likely to abide by the referendum but it would lead to an exposure of the strategies of the United Kingdom or the stance to be taken in the upcoming negotiations with the members of the European Union.