Two days after the elections in the United States, volatility in the debt market has reduced but remains high. This Wednesday it was already contemplated how the sweep of the Republicans in the elections caused a clear flight of investors from US debt assets, interpreting that the Trump corporation’s measures will be clearly inflationary for the US economy, thus slowing down the pace of rate cuts by the Fed in the next few months.
Already this Thursday, investors They bought US fixed income againwhich reached 4.47% of the required 10-year profitability in the secondary on Wednesday at the moment of greatest tension, while at mid-session it is already trading 10 points below, still well above the average for the year and before upon knowing the Fed’s decision and Powell’s message.
Volatility in the fixed income market has reduced from the highs it reached this Wednesday. However, it is still at abnormally high levels compared to recent months. “The movements we have seen respond to the forecast of increased inflationary pressures, to which we must add the cut in supply in the market with fiscal relaxation, which is a perfect recipe for a structurally higher level of returns and term premiums,” explains Wellington Management.
On this side of the Atlantic this Thursday also resulted in sales among the main fixed income references in the eurozone. In this case, what has been quoted the most has been the breakup of the electoral coalition in Germany after Olaf Scholz dismissed his Finance Minister, from the liberal party, Christian Lindner and led the country to an eventual electoral advance in the first quarter of 2025.
“Investors buy assets, not GDPs or governments and from an investment point of view, valuations are more relevant than political events. However, in political terms, the US elections have greater relevance than a change of government in Germany,” they explain from Allianz GI. “All in all, German public debt remains the central pillar of public debt in euros and the performance prospects will depend mainly on the monetary policy of the ECB,” they conclude.
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