November Treasury yields suffer worst month since ’ 09

Trump’s policies, interest rate hikes worry bond investors

U. S. Treasuries in November suffered their worst month since 2009 as investors fret President- elect Donald Trump’s policies will spell bad news for debt investors while also bracing for hikes in short- term interest rates by the Federal Reserve.

The SPDR Bloomberg Barclays Aggregate Bond fund, which tracks the broad bond market, dropped 2.7% in November, its worst monthly performance since the wake of the financial crisis, according to Bloomberg data. Bond prices are falling, and yields on these debt securities are rising sharply, as investors expect an uptick in two of the things most toxic to fixed- income portfolios: inflation and government spending and borrowing.

The 10- year Treasury’s price fell in November, so its yield, which moves opposite of price, jumped to 2.37% from 1.82% at the start of the month. The November jump in the 10- year yield came after a significant gain in October. Taken together, the yield on the 10- year Treasury has jumped from 1.59%, the largest rise in a two- month period since 2013, Bloomberg says. Then, investors sold off Treasuries fearing more aggressive rate hikes by the Federal Reserve.

Politics and expectations are driving the jump in rates. Trump’s campaign largely hinged on his promise to boost spending on government construction projects such as bridges and roads. Big spending plans coupled with large tax cuts could mean higher deficits and additional government borrowing. That could cause the government to sell additional long- term debt. Trump’s Treasury secretary pick, Steven Mnuchin, said he favors selling debt with maturities of more than 30 years.