Two days after the US elections, volatility in the debt market has reduced but remains high. This Wednesday, we were already considering how the sweep Republicans in the election caused a sharp flight of investors from US debt assets, believing that the Trump company’s measures would be clearly inflationary for the US economy, thus slowing the pace of Fed rate cuts in the coming months .
Already this Thursday, investors They bought US fixed income againwhich reached 4.47% of the required profitability at 10 years in the secondary sector on Wednesday at the time of greatest tension, while at mid-session it was already trading 10 points below, still well above the average of the year and before knowing the Fed’s decision and Powell’s message.
Volatility in the fixed income market has decreased compared to the peaks reached this Wednesday. However, it remains at abnormally high levels compared to recent months. “The movements we have observed respond to the forecast of an increase in inflationary pressures, to which must be added the reduction of supply on the market with fiscal easing, which is a perfect recipe for a level of yield and structurally higher term premiums,” Wellington explains. Management.
On this side of the Atlantic, this Thursday also resulted in sales among the main bond references in the euro zone. In this case, what was most cited was the breakup of Germany’s electoral coalition after Olaf Scholz fired its liberal finance minister, Christian Lindner, and led the country to an eventual electoral lead in the first quarter of 2025. .
“Investors buy assets, not GDPs or governments and, from an investment perspective, valuations are more relevant than political events. However, in political terms, the US elections matter more than a change of government in Germany”, they explain from Allianz. GI. “In total, German public debt remains the central pillar of public debt in euros and the performance outlook will mainly depend on the monetary policy of the ECB,” they conclude.
