I am the one who knocks

Is Donald Trump Driving 10Y Yields Higher?

in FX/Rates by

Think the US election doesn’t matter for asset markets? You’d certainly have every reason to make your case. After all, the most contentious and potentially history-altering election in modern history hasn’t been enough to derail the equity and bond rallies; recent long-end mini-VaR shocks notwithstanding.

Uncertainty around the future for US economic policy is profound – and rightfully so. Although both candidates lean towards fiscal stimulus, they’re also both leaning against globalization (Trump of course more so than Clinton). It’s just the type of uncertainty the world does not need in an environment where the US is accidentally killing dozens of Syrian soldiers fighting the very same ISIS which presumably inspired (that’s an assumption, which is why we say “presumably”) terror attacks on New York and New Jersey over the past several days.

But there are signs that the markets are listening – err… watching… whatever – the election. Have a look at the following from SocGen which seems to indicate that the backup in 10Y yields can at least on paper be explained by…. you guessed it…. Donald Trump:

trump

(Chart: SocGen)

Note also the effect on EMFX.

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