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 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.
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"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.
(Reporting by Abhinav Ramnarayan, editing by Ian Edmondson and
Helene Durand)
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