Global bonds post worst monthly loss since mid-2003

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 26, 2016. REUTERS/Shailesh Andrade/Files

By Richard Leong

REUTERS - Investors dumped bonds around the world in November as Donald Trump's U.S. presidential win stoked bets on faster growth and inflation, hitting global bond markets with their biggest rout in about 13-1/2 years.

Bank of America Merrill Lynch's Global Broad Market Index fell 1.76 percent in November, its steepest percentage drop since a 2.06 percent fall in July 2003.

Last month's "Trump thump" was an acceleration of a bond market selloff that began this summer due to rising oil prices and speculation over whether the world's major central banks might be considering of scaling back their unconventional policies.

Meanwhile, Federal Reserve officials have signaled they will likely raise U.S. short-term interest rates by a quarter point to 0.50-0.70 percent at their meeting on Dec. 13-14.

Trump's victory on Nov. 8 stunned many investors who had positioned for a White House helmed by Democrat Hillary Clinton and the likelihood of continued gridlock in Washington, which could leave the economy growing at a slow pace.

These investors quickly shifted their attention to tax cuts, federal spending and deregulation, issues on which Trump had campaigned. They largely concluded the government would ramp up borrowing under Trump and fire up U.S. inflation.

Long-dated U.S. government bonds suffered the heaviest losses in last month's market rout.

The Bloomberg/Barclays' 20-year-plus Treasury index fell 7.71 percent, its biggest since a 13.40 percent drop in January 2009.

Benchmark 10-year Treasury yield climbed to 2.47 percent on Thursday, its highest level since July 2015. It increased more than 50 basis points last month, according to Reuters data.

Junk bonds issued by energy companies survived the market rout, however, eking out a 0.57 percent return in November. This brought their year-to-date return to nearly 34 percent, putting them on course for their best year since 2009 when they generated a 51.2 percent return, according to an index compiled by Bank of America Merrill Lynch.

U.S. crude futures were within striking distance of the 15-month high set in mid-October after OPEC and Russia reached a deal to restrict output on Wednesday. U.S. light crude was last up 3.7 percent at $51.27 a barrel on Thursday.

(Reporting by Richard Leong; Editing by Tom Brown)

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