UK borrowing levels have reached a five-month high, with bond markets experiencing further losses in the wake of an unexpected Trump presidential victory.
According to figures, UK gilt yields are almost at a 6-month high, with European and US debt prices experiencing sharp falls. The interest rates on 10-year government UK debt rose by 1.42 percent on Monday morning, an increase from the 1.36 percent on Friday evening. This marks the highest yield since the end of of the month of May, prior to the June referendum vote.
According to predictions by the Office for Budget Responsibility back in March, each increase by a mere 1 percentage point in Gilt yields increases the UK deficit by up to £3 billion by 2019-20.
Similarly, German yields are are experiencing a fall from previous highs. The yield regarding benchmark 10-year bonds reached a nine-month high on Monday morning peaking at 0.35 percent. According to figures by Reuters, around $1 trillion value wiped off global bond prices since the culmination of the US presidential election last Tuesday.
Reuters analysis said of the market movements:
“German 30-year bond yields broke through 1 percent for the first time in more than six months on Monday, as investors dumped bonds on bets that the policies of U.S. President-elect Donald Trump will push up inflation.
“In a broad debt market sell-off, Italian 10-year yields broke above 2 percent for the first time since September 2015 and U.S. 30-year yields topped 3 percent for the first time since January.
“German 10-year yields – the euro zone benchmark – rose to their highest since January, extending their biggest weekly rise this year after Republican Trump unexpectedly defeated Democrat rival Hillary Clinton in the U.S. presidential race.”
Similarly, US bond prices have fallen in the aftermath of Trump’s election. Yield on 10-year Treasury bills rose to 2.23 percent, from the 2.13 percent seen on Thursday night
Amid the developments, Bloomberg commented:
“A global bond rout is intensifying, sending U.S. 30-year yields above 3 percent for the first time since January, on speculation Donald Trump will increase spending to boost the world’s largest economy.”
Elsewhere, the euro currency experienced its highest fall against the dollar since January with the reaching €1.075 against the euro. The pound sterling also experienced further weakening falling by one cent below $1.25.