European bonds dip as markets mull Trump victory

Fund managers say most of sharp market moves since election now over

Irish government bonds fell in early trading on Wednesday as investors continued to fret about the impact of Donald Trump’s victory in the US presidential election.

Irish government bonds fell in early trading on Wednesday as investors continued to fret about the impact of Donald Trump’s victory in the US presidential election.

 

Irish and other European government bonds fell in early trading on Wednesday as investors continued to fret about the impact of Donald Trump’s victory in the US presidential election.

The move sent the market interest rate, or yield, on the Government’s benchmark 10-year bonds up to 0.965 per cent. This compares with 0.907 per cent at the end of trading on Tuesday, when bonds globally staged something of a relief rally from a massive sell-off since the US vote.

Mr Trump’s victory triggered routs in global bonds and emerging markets, while boosting the dollar and industrial metals on speculation his infrastructure spending plans will spur inflation and prompt the Federal Reserve to speed up the pace of US interest-rate increases.

“Things might have got a little bit overdone with the market having got very excited about reflation and what it’s going to mean,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington. “Most of the sharp adjustment is behind us now and from here you’ll need to see tangible evidence of some of those policy moves.”

European shares were mixed on Wednesday, with the Iseq index dipping by 0.06 per cent to 6,255, while the FTSE 100 in London fell by 0.1 per cent and the pan-European Stoxx 600 edged 0.23 per cent higher.

Wall Street shares rose on Tuesday, with the Dow Jones Industrial Average registering its fourth consecutive record high close as technology stocks rebounded from a post-election battering and energy stocks were boosted by a sharp rise in oil prices.

While volatility in financial markets is easing, US monetary policy remains high on investors’ minds. Fed governor Daniel Tarullo said on Tuesday that an interest-rate rise next month is more likely than before, and market futures imply a 94 per cent probability of an increase. Fed presidents James Bullard, Neel Kashkari and Patrick Harker are all scheduled to speak on Wednesday and may shed more light on the likely trajectory of borrowing costs in the world’s biggest economy.

Additional reporting: Reuters, Bloomberg