Global bonds post worst monthly loss since mid-2003

Reuters: Investors dumped bonds around the world in November as Donald Trump’s US presidential win stoked bets on faster growth and inflation, hitting global bond markets with their biggest rout in about 13-1/2 years.

Bank of America Merrill Lynch’s Global Broad Market Index fell 1.76% in November, its steepest percentage drop since a 2.06% fall in July 2003.

Last month’s “Trump thump” was an acceleration of a bond market selloff that began this summer due to rising oil prices and speculation over whether the world’s major central banks might be considering of scaling back their unconventional policies.

Meanwhile, Federal Reserve officials have signalled they will likely raise US short-term interest rates by a quarter point to 0.50-0.70% at their meeting on December 13-14.

Trump’s victory on November 8 stunned many investors who had positioned for a White House helmed by Democrat Hillary Clinton and the likelihood of continued gridlock in Washington, which could leave the economy growing at a slow pace.

These investors quickly shifted their attention to tax cuts, federal spending and deregulation, issues on which Trump had campaigned. They largely concluded the government would ramp up borrowing under Trump and fire up US inflation.

Long-dated US government bonds suffered the heaviest losses in last month’s market rout.

The Bloomberg/Barclays’ 20-year-plus Treasury index fell 7.71%, its biggest since a 13.40% drop in January 2009.

Benchmark 10-year Treasury yield climbed to 2.47% on Thursday, its highest level since July 2015. It increased more than 50 basis points last month, according to Reuters data.

Junk bonds issued by energy companies survived the market rout, however, eking out a 0.57% return in November. This brought their year-to-date return to nearly 34%, putting them on course for their best year since 2009 when they generated a 51.2% return, according to an index compiled by Bank of America Merrill Lynch.

US crude futures were within striking distance of the 15-month high set in mid-October after OPEC and Russia reached a deal to restrict output on Wednesday. US light crude was last up 3.7% at $ 51.27 a barrel on Thursday.