A second Donald Trump presidency could lead to a rise in long-term US Treasury yields, according to Edmond de Rothschild Asset Management's Chief Investment Officer Benjamin Melman.

Reuters reported that Melman said Thursday that Trump's policies on taxes and immigration could exert pressure on the US labor market and the broader economy, which could, in turn, impact bond yields.

Economic Policies of Donald Trump

Following their debate on June 27, Donald Trump has gained a substantial lead over President Joe Biden. The anticipation of a Trump win has already influenced the market, with 10-year US Treasury yields climbing to their highest levels in over three weeks, approaching 4.5%. 

Melman said that Trump's economic policies are inflationary. Reuters reported that the former president's proposal to impose tariffs on foreign imports, particularly a 60% tariff on Chinese goods, could lead to price increases for US consumers, thus fueling inflation.

Trump's plan to conduct the largest deportation effort in US history, targeting millions of individuals, could have further economic implications.

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Market Reaction to a Potential Donald Trump Victory

Jacques Aurelien Marcireau, co-head of equities at Edmond de Rothschild, noted that the markets reacted swiftly to the increasing likelihood of a Donald Trump presidency. 

He explained that despite a generally bullish environment for fixed income, the long end of the US yield curve appears less optimistic due to the political risk associated with the former president's policies.

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