Global bonds head for biggest two-week loss in quarter century

SINGAPORE (BLOOMBERG) - Bonds around the world headed for their steepest two-week loss in at least 26 years as President-elect Donald Trump sends inflation expectations surging.

The Bloomberg Barclays Global Aggregate Index has fallen 4 per cent in the period through Thursday (Nov 17). It's the biggest two-week rout in the data, which go back to 1990.

Federal Reserve Chair Janet Yellen fueled the decline by saying on Thursday that an interest-rate hike could come relatively soon.

"Trump is a game changer," Park Sung-jin, the Seoul-based head of investment at Mirae Asset Securities Co, which oversees US$7.61 billion. "I was bearish, but the current level is more than I expected. It was harsh."

Treasury 10-year note yields rose three basis points to 2.34 per cent as of 12:36pm in Tokyo, according to Bloomberg Bond Trader data. The 2 per cent security due in November 2026 fell 9/32 point, or US$2.81 per US$1,000 face amount, to 97.

The selloff has gone fast enough that it'll probably pause before yields press higher in 2017, Park said.

The difference between yields on 10-year notes and same-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, rose to 1.97 percentage points this week. It was the highest level since April 2015.

The president-elect's pledges include tax cuts and spending US$500 billion or more over a decade on infrastructure, a combination that's seen as spurring quicker growth and inflation in the world's biggest economy. Trump has also blamed China and Mexico for American job losses and threatened punitive tariffs on imports.