Long bonds’ long fall

Bond markets have borne the brunt of the Trump victory amid a jump in inflation expectations and high valuations. The worst falls have been in long-dated government bonds, a sector that has looked like a bubble in search of a pin for years now. Long bonds are especially vulnerable to shifts in interest rates and inflation projections: as yields climb, bond prices slide sharply.

Mexico’s 100-year paper, which matures in 2110, has fallen by almost 15% since the election. Italy’s 50-year bond, issued with a yield of just 2.85%, lost more than 7% in the week after Trump’s win. Throw in jitters over Italy’s referendum, and it’s no wonder it has fallen by around 15% since its sale.

Long bonds in traditionally more stable states have also suffered, with Austria’s 70-year bond, issued last year, slipping by 13% since the vote. The price of Britain’s  50-year debt fell by around 5% in the six days after the upset.