title: Markets ignore Trump presidential bid at their peril
text: LONDON (IFR) - The prospect of Donald Trump becoming the next U.S. president and ushering in a period of increased public spending and de-globalisation has not been adequately priced into bond markets, market participants have warned.  Trump, currently a candidate for the Republican nomination for U.S. president, could prove disruptive for global markets if he comes into power and brings in policies that match the radical nature of his rhetoric. “I think one big uncertainty that has so far been ignored by the market is Donald Trump: what happens if he is elected,” Patrick Barbe, chief investment officer, European Sovereign & Aggregate, BNP Paribas Investment Partners, told IFR. “We don’t have any specific policies from him yet, but the tone of what he is saying suggests increased wages, expansion of the public sector and rising government expenses; everything that bond markets tend not to like.”  While the U.S. markets will be most affected, the repercussions could be felt throughout the world, as the US still accounts for the largest chunk of the world’s GDP; over 22 percent in 2014, according to the World Bank.  Trump this week recorded a comprehensive victory in the New York primary, injecting renewed momentum into his campaign to become the Republican nominee.  The vote scheduled for November has had a limited effect on bond markets so far. US Treasuries have tended to trade much more on rates expectations than on political risk so far this year, and 10-year UST yields have dropped as much as 36bp since the start of the year to 1.88 percent, according to Eikon prices.  Moreover, there has been very little research or analysis done on the subject up to this point, though that is likely to change as the nomination process continues.  “I don’t think the market has fully thought through the implications of Trump as U.S. president, but it is definitely moving up the agenda,” said David Riley, head of credit strategy at BlueBay Asset Management.  “In my view, populist politics typically is also associated with protectionist economic policies. Certainly a concern would be a more isolationist, protectionist U.S., which would reinforce a fear that, after an era of globalization, we would enter an era of de-globalisation.” ISSUERS FRONT-RUN In the public sector market there has been record levels of US dollar bond issuance this month, partly because SSA issuers are looking to get their borrowing done ahead of any political risk associated with the U.S. election. “Market conditions are primarily driving the issuance as it is looking very solid at the moment, but the U.S. election will cause uncertainty the closer you get to it. A lot of people are getting in ahead of these events,” said one syndicate official who covers public sector debt.  There has been $38.9 billion of U.S. dollar bond issuance month-to-date by public sector issuers, according to IFR data, led by the likes of Washington-based supras World Bank and Inter-American Development Bank.  With a week still to go, that is comfortably above the US$35bn raised in January - traditionally the busiest month of the year for the SSA sector. 