What Donald Trump’s election means for government-bond markets

After Donald Trump was elected for presidency, the yield on the two-year bond rose from 0.78% to 1.12% and the ten-year treasury bond rose from 1.73% to 2.36%.  The thought behind these jumps is because of the belief that Trump will "push through a fiscal stimulus, in the form of tax cuts and infrastructure spending.  Not only will that boost the American economy but it will allow the Federal Reserve to return monetary policy to more “normal” levels by pushing up rates from the current 0.5%. It could also lead to higher inflation in the medium term. Forecasts for American inflation in the early 2020s can be derived from the bond market. In July, they pointed to 1.4%; now they imply 2.1%. All three factors—faster growth, rising short-term rates and higher inflation—are usually drivers of higher bond yields." 

So far this year, The thoughts of deflation and a quick slowdown in the Chinese economy has gone away.  Because of this, it is less likely that people will want to won government bonds.  Investment is becoming less popular. 

"The rise of extremist politicians brings with it the risk of extreme outcomes. The problem for investors is that the implications of such shocks are not uniform. The Brexit vote was followed by a fall in bond yields (as cautious investors opted for the safety of bonds), but the election of Mr Trump caused yields to rise. Had the president-elect made a swift promise to pursue his protectionist agenda, however, bond yields might have fallen, since a tariff war would hurt economic growth. The election of Marine Le Pen as French president would probably cause European government bonds to sell off; yields in America and Japan might fall."


http://www.economist.com/news/finance-and-economics/21711036-recent-falls-bond-prices-and-rises-yields-may-not-signal-end-low