Is it 5% of U.S. government bonds...Bond Market Suspension, Rate Cuts Expectations

Uncertainty in the bond market continues as former U.S. President Trump is elected.

In the U.S. bond market last week, government bond rates rose sharply on the 6th, when Trump's presidential victory was confirmed, and then fell again quickly over the next two days.

In terms of the week, it is down rather than at the beginning of the week.

Financial companies such as BlackRock, JPMorgan Chase and TCW are pointing out that instability in the bond market is not over yet.

Trump's election is expected to result in tax cuts and large tariffs in the future, which will raise import costs and stimulate the economy, raising the risk of inflation lifting its head again.

Trump's policy is also expected to significantly increase the federal fiscal deficit, raising the possibility of an increase in the supply of new government bonds and a subsequent rise in interest rates.

"As interest rates inevitably rise in the bond market, they are likely to make us realize the growing fiscal deficit," said Janet Lilling, senior portfolio manager at Allspring Global Investments.

At the same time, it predicted that the yield on 10-year government bonds could rise again to a peak of 5% at the end of last year.

On the contrary, some argue that Trump's pledges are already reflected in current bond rates.

It's unclear what policies Trump will come up with in the future, and investors have been betting on Trump's victory long before the presidential election, so they've shaped the price now.

The Fed's expectations for a rate cut in the future have been greatly reduced.

Interest rate futures investors expected the Fed's benchmark rate to be 4% by mid-2025.

This is 1 percentage point higher than expected in September.

Some point out that economic indicators coming out this week, particularly the consumer and producer price index, may trigger new volatility.