Government bonds are under a lot of pressure, making the world stocks drop. In the UK, the bond market is not exempted from this; gilts or bonds have at the highest yields for more than 16 years, which is creating alarm about the stability of Britain's finances.
The pound declined to 0.6% to its lowest since November 2023. There is concern on the rise in inflation, the unknown policies by the incoming US President Donald Trump, and the possible sales of debt that made the global bond yields jump.
According to Reuters, the upward movement in bond yields is mainly because of global inflationary concerns and reduced expectations about the cuts in interest rates, especially in the US market. The recent US Treasury yields rose to 4.73%, the highest since April 2024, due to the fact that the US economy seems to be more resilient. Meanwhile, the dollar index has jumped to 109.08, closest to its recent high since November 2022.
This sell-off of bonds is not peculiar to the UK but is worldwide, as people are wondering if places like the UK can really succeed in getting back to economic growth.
How Trump Policies Will Impact US Markets
The bond market's of the UK is partly linked to the potential economic policies of Donald Trump.
Recent reports from The Guardian suggest that Trump may declare a national economic emergency to justify imposing tariffs. This uncertainty has further intensified market concerns, especially regarding US inflation. The Federal Reserve's December meeting minutes revealed concerns that Trump's policies, including tariffs and immigration restrictions, could prolong inflationary pressures, which could delay any expected rate cuts.
The global stock market sentiment has been fragile so far. Commodities like oil and gold fell slightly and oil prices were under pressure from the stronger dollar. The US payroll report is expected to provide key insights into future policy decisions of all major countries.
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