The bonds show that the fear tariff will offer inflation and growth shocks

(Bloomberg) – The American bond market was thwarted in order to warn President Donald Trump, who unleashes definitions of major trade partners risk to provide inflation and slow the nation’s economic growth.

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He led his definition-despite his delay later on Monday in the issue of Mexico-the cabinet revenues with brief parts by up to eight basis points to 4.28 %, to expect that it will maintain the high interest rates by raising consumer prices. But long -term revenues have moved in the opposite direction on fears that the economy will stop, which narrows the gap between those in bonds for 2 and 30 years at most since early December.

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While the movements were divided after Trump agreed to temporarily postpone the increases on Mexico to allow negotiations, the broader direction of the market that was largely held for the rest of the New York session, showing fears that the trade war will deal.

“It seems likely that the supposed trend at the present time is high inflation and lower growth,” said James Ati, a wallet manager in Marlboro Investment Management. “The curve is the potential result, along with stronger US dollars.”

The risk that can be surrounded by high import rates in inflation may hover over the markets since the election of Trump in November, which led to a reduction in any expectations that the Federal Reserve will reduce interest rates this year. The central bank last month stopped alleviating the monetary policy that started in September, and the pricing of futures in that it will remain pending until July or September.

“The risk of inflation is high,” said Jack McNantter, director of the portfolio in the Global Brandiin Investment Management, in reference to a mixture of stagnant growth and high inflation. “Anything related to growth must be seen through the lens of uncertainty. The investment may be delayed until we get more clarity.”

During the weekend, Trump continued his threat to impose fees on the exports of Canada, Mexico and China, with a repeat of a warning to the European Union, which will definitely happen. Goldman Sachs Group Inc. The current trend of the bond market, which flattens the return curve. Corporates including BNP Paribas SA and DBS Bank said in Singapore and SMBC Nikko Securities Inc. In Japan, this exposes the American economy to the risk of recession.

With gasoline and food not excluding from the definitions, BNP strategists said that the long -term inflation expectations can continue to rise, preferring their bonds associated with inflation for 10 years.

Calvin Tse, head of the American College and US Economy Strategy at BNP in New York, said the Federal Reserve will likely retain rates of the next two meeting while governing whether the risk of growth or inflation is “more dangerous.”

They added: “If this is already achieved, we believe that high prices become a real possibility of the Federal Reserve this year, even in the face of low growth.”

While this rise in average is currently seen as a long shot, the combination of inflation and weak economic growth has also decreased to the stock market on Monday. The rush to sanctuaries also benefits from long -term bonds, which usually advance when you expect growth to grow.

“There is no opportunity to reduce the Federal Reserve in the future for the foreseeable future,” said Cathy Jones, head of fixed income strategies in Charles Schwab. “The market is pricing in high inflation” and if the shares continue to “decline a lot, the journey to safety will mean the inverted return curve.”

The euro area bonds diverged sharply from our peers in the United States, gathering amid a wide trip to safety.

Last week, the Federal Reserve left a policy unchanged as he waited for new inflation. On Friday, the data showed that the preferred scale of the Central Bank of Basic Inflation remained silent in December and that the real available income is barely rising.

Goldman Sachs believes that the Federal Reserve is more vulnerable to pregnancy at firm prices to contain inflation risk instead of reducing them to increase growth.

“More extremist results must coincide with markets more of the negative aspect of growth/less budget to more inflation, which eventually increases long -term returns and curve settlement,” said Dominic Wilson, the chief market consultant in Goldman.

-With the help of Matthew Thomas, Naya de Silva, Michael McKenzi and Les Capo McCurmik.

(Update prices all the time, adds comments in the fourth paragraph)

Most of them read from Bloomberg Business Week

https://media.zenfs.com/en/bloomberg_markets_842/c63e822ab4827800fcec424354058129

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