Bond markets worry about higher rates under Trump
Significance Equity markets have risen in anticipation of a fiscal stimulus package which would boost growth prospects. In contrast, demand and prices for government bonds, which were already under strain due to rising inflation expectations, have fallen due to fears of aggressive interest rate tightening to combat a debt-fuelled inflation surge. A sustained bond sell-off -- particularly one accompanied by a sharp rise in inflation -- could lead to a severe deterioration in sentiment towards 'risky assets'. Impacts Investors will see Trump's victory as a shift from ultra-loose monetary policy towards a greater reliance on fiscal stimulus. Stock market enthusiasm for tax and spending ideas could evaporate if these plans are not implemented or do not boost growth as expected. Copper had its best week for five years as Trump's stimulus plans are expected to boost demand and prices for industrial metals. The rouble was less affected by the election than other major emerging market currencies on hopes that US-Russian relations will improve.