Donald Trump’s tax reform, the US Fed’s hawkish remarks and the US economic situation can lead to a slump in global bond markets.
The stock market had a mixed reaction, while the bond market is on the edge of collapsing. In particular, sell-offs in the US Treasuries triggered stop orders, which in its turn made the US 10-year bond yield jump to 3-month highs of 2.35 percent. The sell-offs took place in other global markets as well.
The US President’s tax reform implies reductions in the corporate tax, taxes for small businesses and income tax for individuals. After this plan was revealed, market participants concluded that there are higher chances for a rate hike by the Federal Reserve in the near future.
Experts point out that low taxes on repatriation of cash that multinational companies are holding overseas will result in temporary strengthening of the US dollar. Offering shorter-dated Treasuries will also boost the US dollar.
